What is a Regulated Bridging Loan?
Regulated Bridging Loans are a type of short-term financing that is subject to regulatory oversight and consumer protection measures.
They are typically used to bridge the gap between the purchase of a new property and the sale of an existing property. Bridging Loans help by providing temporary funding until the sale is completed.
The term “regulated” refers to the fact that these loans are governed by specific regulations and guidelines. These are set forth by financial authorities or regulatory bodies in a particular jurisdiction. The regulations aim to protect borrowers and ensure that they are treated fairly by lenders.
In many countries, including the United Kingdom, regulated bridging loans are subject to stricter regulations compared to unregulated bridging loans. The regulations often focus on ensuring transparency in lending practices, providing clear information about loan terms and conditions, and protecting borrowers from unfair practices or abusive interest rates.
Regulated bridging loans are typically used by individuals or consumers rather than businesses, and the borrower’s primary residence or a property intended for residential use is usually used as security. Lenders offering regulated bridging loans are required to follow specific rules and guidelines regarding affordability assessments, disclosure of terms, interest rates, and the handling of customer complaints.
The difference between unregulated and regulated bridging loans explained
Regulated bridge loans are those regulated by the Financial Conduct Authority, and are used on properties that you are living or going to live in. They are secured by first charges against the property that is currently occupied, or will soon be occupied.
An unregulated bridging loan can be a first charge loan on a commercial property, or a first charge loan on a property being used as an investment. It can also be acquired from second charge bridging lenders if the borrower’s home is over £25,000 and for business purposes.
What is a Buy to Let Bridging Loan?
A Buy to Let Bridging Loan is a specific type of bridging loan designed for property investors. The aim is to provide funding to those who wish to purchase a property for rental purposes.
It provides short-term financing to bridge the gap between the purchase of a property and securing a long-term buy-to-let mortgage. It also helps to buy time to arrange other forms of long-term financing.
The key features of a Buy to Let Bridging Loan include:
- Property investment purpose: Those who plan to buy a property with the intention of renting it out.
- Short-term financing: Bridging loans are short-term loans typically repaid within a few months to a year. This allows property investors to secure the property quickly while they arrange long-term financing or complete necessary renovations.
- Speed and flexibility: Buy to Let Bridging Loans are known for their quick processing times and flexible lending criteria. This allows investors to capitalize on time-sensitive investment opportunities or resolve urgent financing needs.
- Property as security: The property being purchased or other properties owned may be used as security for the loan. The lender assesses the value of the property to determine the loan amount.
- Interest rates and fees: Bridging loans generally have higher interest rates and fees compared to traditional mortgages. This is due to their short-term nature and greater risk involved.
Get in Touch
Finally if you think your business could benefit from a Regulated Bridging Loan get in touch to discuss your options.
With the right support and funding, your business can obtain the funding it requires to thrive in the future.
Thinking of applying for a buy-to-let bridging loan, or another kind of short term finance? Get in Touch today!!