Regulated vs unregulated bridging loan: how to tell which applies

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What is a regulated bridging loan?

A regulated bridging loan is a bridge that meets the definition of a regulated mortgage contract. Under the rules that apply in the UK, a loan is a regulated mortgage contract where:

• the lender provides credit to an individual or to trustees;
• the loan is secured by a first or subsequent charge on land in the UK; and
• at least 40% of that land is used, or is intended to be used, as or in connection with a dwelling by the borrower or a related person (or, for trustees, by a beneficiary or a related person).

A related person includes a spouse or civil partner, someone living with the borrower as a partner, and a parent, brother, sister, child, grandparent or grandchild. In plain terms: if you or your immediate family live in, or will live in, at least 40% of the property, the loan is regulated.

The classic example is a homeowner buying a new house before selling their current one. In the commercial world, it most often arises with a shop or pub where the owner lives in the flat upstairs.

What is an unregulated bridging loan?

An unregulated bridging loan is secured on property that neither you nor your family will live in, and is taken for business or investment purposes. It falls outside the regulated mortgage contract definition, so the lender and the broker work under the commercial terms of the loan rather than the FCA's mortgage conduct rules. Our page on unregulated bridging loans covers the product itself.

Typical unregulated cases include:

• Buying an office, retail unit or industrial building as an investment or for your business.
• Funding a commercial property auction purchase within the completion deadline.
• Buying land with or without planning permission.
• Refurbishing or converting a commercial building for sale or letting.
• Raising capital against a commercial property for another business purpose.

A non-regulated loan is simply another name for the same thing: borrowing that sits outside the regulated mortgage contract definition.

Where exactly is the line? Worked examples

The test turns on two facts: who will live in the property, and how much of it they will occupy. The examples below are illustrative and simplified. Each real case depends on its own facts.

Scenario	Likely position	Why
Company buys a vacant office to refurbish and let	Unregulated	Commercial property, business purpose, no dwelling for the borrower
Investor buys a parade of shops with flats let to unrelated tenants	Unregulated	Flats are occupied by tenants, not the borrower or family
Business owner buys a shop and will live in the flat above, which is half the building	Regulated	Borrower will occupy at least 40% as a dwelling
Pub with a large owner's flat, landlord and partner living there	Likely regulated	Depends on the share of the land used as the dwelling
Bridge secured on a warehouse, plus a second charge on the borrower's own home	May be regulated	Turns on how much of the total security is the borrower's home; we introduce it to an FCA-authorised firm
Barn bought to convert into the borrower's future home	Regulated	Intended occupation counts, not just current use

Note the word intended. A building that is empty today but which you plan to move into is assessed on that future use.

Why does it matter on semi-commercial and mixed-use property?

Semi-commercial buildings, such as a shop with flats above, are where the line is most often tested. If the flats are let to tenants, the bridge is usually unregulated. If you, or a close family member, live in a flat that makes up 40% or more of the property, it is regulated.

Measuring that 40% is not always straightforward. It relates to the land, and in multi-storey buildings floor area is the usual guide, but outbuildings, gardens and shared areas can complicate it. Lenders tend to be cautious, so in practice where any part of the security is, or will be, a home for you or your family, we introduce the case to a firm directly authorised by the FCA, which can assess the position properly.

Our pages on semi-commercial bridging loans and mixed-use bridging loans explain how lenders view these buildings.

What does regulation mean for you as a borrower?

The two routes come with different rules and protections. The main differences are summarised below.

Area	Regulated bridging loan	Unregulated bridging loan
Who can advise and arrange	Firms authorised by the FCA for mortgage activity	Commercial brokers and lenders, including us
Affordability	Lender must assess affordability under FCA rules	Lender focuses on the property and the exit
Exit evidence	Credible repayment strategy required under the rules	Required commercially by the lender
Typical term	Usually up to 12 months	Commonly 6 to 18 months, up to 24
Complaints	Access to the Financial Ombudsman Service for regulated activity	Governed mainly by the loan contract
Process	More disclosure documents and checks	Often quicker, with fewer formal steps

Unregulated does not mean unprotected. You still sign a legally binding contract, take advice from your own solicitor, and lenders still carry out valuation, legal and identity checks. But the responsibility to understand the terms sits more firmly with you.

Does borrowing through a limited company change the position?

The regulated mortgage contract definition applies to credit provided to individuals or trustees, so a loan to a limited company or SPV usually falls outside it. That is one reason most commercial bridging is arranged in a company name. Our guide to bridging loans for limited companies explains how company borrowing works.

However, a company structure is not a way around regulation where a home is involved. Lenders look closely at any property a director or their family lives in, many will not lend to a company against it without further checks, and some insist the case is handled as regulated. If the security includes a home, tell us at the start and we will route it correctly.

Who arranges each type of bridging loan?

We are a commercial bridging broker and introducer, not a lender, and we are not directly authorised by the Financial Conduct Authority. That shapes what we do:

• Unregulated bridging: we arrange it directly, comparing a broad panel of bridging lenders, from specialist lenders to private credit funds.
• Regulated bridging: we introduce you to a firm directly authorised by the Financial Conduct Authority, which advises on and arranges the loan under the FCA's rules.
• Mixed cases: where a deal has both elements, we explain the split before anything is submitted, so nothing is delayed later.

You can read more about the steps on our how it works page.

How to check which route your bridging loan needs

Ask yourself these questions before applying. If the answer to any of the first three is yes, the bridge may be regulated.

1. Will you, or a spouse, partner, parent, sibling, child, grandparent or grandchild, live in any part of the property?
2. Is any part of the security your current home, including as additional security?
3. Do you intend to move into the property after works are finished?
4. Is the borrower an individual or trustees, rather than a company?
5. Is the purpose of the borrowing business or investment?

If the answers point to a purely commercial or investment case, such as buying business premises without living accommodation, the bridge is unregulated and we can arrange it directly.

Unregulated commercial and investment bridging is arranged directly. Any case where the security includes a home you or an immediate family member occupies, including a flat above commercial premises, may be regulated and is introduced to a firm directly authorised by the Financial Conduct Authority. We are not directly authorised by the Financial Conduct Authority ourselves. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.