In the UK, a regulated bridging loan means a loan that is secured against a property that is already occupied, or will soon be occupied, either by the borrower or by the borrower’s immediate family members. If someone else is going to reside in the property, you will perhaps need a buy-to-let bridging loan or mortgage.
A regulated bridging loan can be either a first charge or a second charge. That means it can be the only loan secured against the property, or if a property has equity available after the mortgage or any other type of loan, it can be placed behind the first charge loan. This type of bridging finance is regulated by FIBA and has nearly the same conditions as residential mortgages.
Some aspects of regulated bridging loans are:
• They can be secured for maximum terms of 12 months
• They offer rolled-up interest options
• They have a strict exit strategy – sale of the property or refinancing are the only permissible options
• They are usually restricted to a maximum of 70% LTV
Some circumstances where the regulated bridging loan can be used are:
• Purchasing a property at the auction
• Breaking the property chain
• Renovating property you presently live or planning to move into
Can I Secure Regulated Bridging Finance for Property Development?
If you wish to develop a property, that will be your residence, then it is possible to take out a regulated loan. In that case, at least 40% of the property must be used for the residence to be eligible for the loan. It is commonly used to build a property from scratch on empty land or extend a garden on the existing property. Development finance lenders London offers specialized funding solutions for property developers to finance construction projects and real estate investments.
A bridging loan is said to be unregulated when the secured property is for commercial or investment purposes, and it will never be used by the borrower or any immediate family member. FIBA doesn’t regulate such bridging loans, which are acquired to buy an investment property, commercial real estate or buy-to-let property.
An unregulated bridging loan is a popular way of securing funds for people willing to complete the property transaction faster. They are more flexible than regulated bridging loans as they eliminate a lot of constraints and can be customized according to the borrower’s individual needs. Just like regulated bridging loans, unregulated bridging loans can be either a first charge or a second charge.
The benefits and risks of unregulated Bridging Loans Lenders will generally offer unregulated bridging loans in circumstances, such as:
• Securing commercial or residential property quickly
• Investing in a buy-to-let property
• Buying a property at the auction
• Starting or expanding your business
• Refurbishing or renovating a property for resale
• Expanding your property portfolio