What is an unregulated bridging loan?

The split comes down to the property the loan is secured on, not the borrower. A bridging loan secured on a property that the borrower or an immediate family member occupies, or will occupy, is a regulated mortgage contract. That case must involve a firm directly authorised by the Financial Conduct Authority, who carries out the regulated activity and gives any required advice.

A bridging loan secured on commercial, investment, buy to let or refurbishment property is unregulated commercial lending. It sits outside the Financial Conduct Authority's mortgage regime, and it is what this page covers.

The test is occupation of the security property, not who the borrower happens to be. If nobody connected to the borrower lives, or plans to live, in the property being used as security, the loan is generally unregulated. This covers a wide range of everyday bridging scenarios:

• Commercial units, shops, offices and industrial property
• Investment property bought to let out rather than live in
• Buy to let property, including portfolio landlords
• Refurbishment or conversion projects with no residential occupier
• Land and development sites

A limited company borrower is almost always treated as unregulated, since a company cannot occupy a home in the way the rules require.

In practice, most of the demand for unregulated bridging comes from people running a property business rather than buying somewhere to live. Common borrowers include property investors and landlords buying quickly at auction, developers bridging a site before longer term development finance is in place, business owners raising funds against commercial premises, and landlords refinancing a buy to let portfolio.

Because none of these cases involve a residential occupier, they can be arranged directly with a lender or a broker, without the additional layer of regulated mortgage advice.

Refinancing an unregulated bridge, whether that means moving to a new bridging facility, arranging a buy to let mortgage, or drawing down development exit finance, is arranged directly. There is no requirement to route the case through a firm directly authorised by the Financial Conduct Authority, and no separate regulated advice process to sit alongside it.

That does not mean the process is less thorough. A lender will still want an up to date valuation of the security, evidence of the exit route, whether that is a sale, a remortgage or a letting, and a clear picture of the borrower's or company's finances. What it removes is the extra regulatory layer that applies when the security is somebody's home.

Where the original loan is secured on a home the borrower or their immediate family occupies, such as a chain break bridge, refinancing has to be arranged through a firm directly authorised by the Financial Conduct Authority. That firm carries out the regulated activity and gives any advice the case needs. We introduce these cases to that firm; we do not give the regulated advice ourselves.

An unregulated case skips that step entirely. The refinance is arranged directly, using the same wide approach to sourcing terms, but without needing to hand the regulated advice element to another firm.

Unregulated status does not mean unsupervised or reckless. It simply means the Financial Conduct Authority's mortgage conduct rules do not apply to that particular loan. Reputable lenders still underwrite unregulated bridging carefully, checking valuation, loan to value and the exit strategy before they lend.

What does not change is that this remains secured lending. If the loan is not repaid on the agreed terms, the property used as security is at risk, regardless of whether the loan was regulated or not. A realistic exit strategy, agreed before you draw the loan, matters just as much on the unregulated side.