Regulated versus unregulated bridging loans
- Regulated: where the security property is or will be the borrower's home — FCA-regulated, Consumer Duty applies, access to FOS
- Unregulated: where the security is a buy-to-let investment — less prescriptive, much faster, most BTL bridges are unregulated
- Cannot use an unregulated bridge where the borrower or family intends to live in the property
Key loan mechanics
- Gross loan includes all rolled-up interest and fees — the balance grows over the term
- LTV typically 70-75% against open market value; first charge preferred
- Interest options: serviced (monthly), rolled-up (added to balance), retained (deducted at drawdown)
- Arrangement fee: 1-2% of gross loan; exit fee: typically 1%
Common landlord uses
- Auction purchases: must complete within 28 days — bridge arranged in 5-10 days
- Uninhabitable/unmortgageable property: bridge while refurbishing, exit to BTL mortgage
- SDLT surcharge bridge: fund new main home purchase, reclaim 3% surcharge after old home sells within 3 years
- Chain-breaking: fund purchase while sale of another property is delayed
- Refurbishment to uplift value or EPC rating before remortgage
Exit strategy — the most critical element
Key risk
A landlord who cannot exit the bridge at term faces penalty extensions, possible refusal, and in extreme cases repossession. Always stress-test the BTL remortgage exit at current ICR rates before drawing down.
- Primary exit — BTL remortgage: property tenanted, meets lender criteria (EPC, ICR, habitability)
- Primary exit — sale: bridge repaid from sale proceeds at completion
- Secondary exit: extension, further advance, or sale at a lower price if primary fails
- Always allow contingency margin in the bridge term — refurbishments routinely overrun
Costs — worked example
£180,000 bridge on a £240,000 property (75% LTV), 9-month term, 0.75%/month rolled up:
- Interest: £12,150 rolled up
- Arrangement fee (2%): ~£3,843
- Exit fee (1%): ~£1,922
- Legal + valuation fees: ~£3,000
- Total bridge cost: ~£20,900 (equivalent to ~13.9% annualised) — compare with £7,425 for a BTL mortgage over the same period