Per definition, bridging loans are financial applications done within a small timeframe (usually up to a maximum of 1 year) and understanding their regulation process isn’t extremely complex. Bridging loans become, in fact, regulated when the loan is secured for a property which currently has occupiers living there. With this in mind, let’s try to dive into the matter in more detail.
Regulated Bridging Loans
The regulation of bridging loans is following the Financial Conduct Authority and is mainly related, as said above, to the occupational status of the property. If a specific property is, in fact, occupied by the borrower or a member of his family, the bridging loan becomes regulated. The regulation could happen even if the borrower’s family is occupying the property, another important variable to keep in mind if regulated bridging loans are what you are looking for.
Unregulated Bridging Loans
When the property which is being set up for a bridging loan is used for business purposes and, therefore, won’t be occupied by the borrower, the bridging loan falls under the unregulated category. To clarify this, it’s possible to classify a bridging loan as “unregulated” even when the very loan is related to a company and not a single individual.
The Application Process
Given the differences between these two types of loans, understanding the separation for what concerns their specific application processes is also quite important. For example, a regulated loan is very likely to be limited to 12 months, given the fact that such limitation implicitly guarantees the lender more stability. For what concerns unregulated loans, instead, exit routes have a more flexible setup (these routes, in a regulated scenario, are normally opened to refinance or sell the actual property) and, therefore, are a clear indication of why they are used for commercial properties.
Understanding the separation between these two loans is very important as it gives you a clearer idea about which one would suit your needs best. Regulation, when it comes to private properties, is something which should be actively looked into by everyone who’s looking for a bridging loan for his/her property.