What is a Regulated Bridging Loan?
When it comes to financing a property purchase, there are a variety of options available. One such option is a regulated bridging loan.
In this blog, we will explore what this type of loan is, how it differs from other types of loans. We explore the advantages and disadvantages of using this type of financing.
What is a Regulated Bridging Loan?
A regulated bridging loan is a type of short-term finance used to bridge the gap between the purchase of a new property and the sale of an existing one.
This type of loan is regulated by the Financial Conduct Authority (FCA). It is subject to more stringent criteria than unregulated bridging loans.
Regulated bridging loans are typically used by individuals who are looking to purchase a new property before selling their existing one.
The loan is secured against the existing property and can be used to provide a deposit for the new property. It can also be used to cover renovation costs, or pay for any other expenses related to the purchase.
How is a Regulated Bridging Loan Different from Other Types of Loans?
One of the main differences between a regulated bridging loan and other types of loans is that it is secured against property. This means that the lender has the right to repossess the property if the loan is not repaid. In addition, regulated bridging loans are subject to more stringent criteria than unregulated bridging loans. For example, the lender must be authorized by the FCA and the borrower must meet certain affordability criteria.
Another key difference is that regulated bridging loans are typically short-term loans, with a maximum term of 12 months. This is because they are designed to be a temporary solution. In contrast, other types of loans, such as mortgages, are long-term loans that can span over several years.
There are several advantages to using a regulated bridging loan. Firstly, they can provide a quick and flexible source of finance. This is because the lender will typically base their decision on the value of the property rather than the borrower’s credit history.
The result is that the loan can be approved and processed quickly, allowing the borrower to access the funds they need in a timely manner.
Secondly, regulated bridging loans can be used for a variety of purposes. For example, they can be used to purchase a new property, pay for renovations, or cover other expenses related to the purchase. This can provide borrowers with greater flexibility and control over their finances.
Despite the advantages, there are also several disadvantages to using a regulated bridging loan. Firstly, they can be more expensive than other types of loans. This is because they are short-term loans and typically have higher interest rates than long-term loans, such as mortgages.
Secondly, with these types of loan there is a higher risk involved.
This means that if the borrower is unable to repay the loan, the lender has the right to repossess the property.
As a result, borrowers need to be confident that they will be able to repay the loan in full and on time.
A regulated bridging loan can be a useful tool for individuals who need to bridge the gap between the purchase of a new property and the sale of an existing one.
However, it is important to carefully consider the advantages and disadvantages before deciding the right option for you. If you are unsure, it is always best to seek professional advice from a financial advisor or mortgage broker.
How to apply for a Bridging Loan?
To conclude applying for a Regulated Bridging Loan is very simple. Enter your details below or call 0161 8211478 to speak with one of our specialists.