Key takeaways
- The test looks at three things: the type of borrower, who will live in the property, and how much of it is a home.
- A loan to an individual or trustee is generally regulated when at least 40% of the property is, or will be, a home for the borrower or a related person.
- A loan to a company, other than one acting as a trustee, is unregulated.
- A sole trader borrowing for business against their own home can still be regulated, unless an FCA exclusion applies.
- A landlord who plans to live in the property during a refurbishment is on the regulated side of the line.
A bridging loan is generally regulated when it is secured on UK land, made to an individual or trustees, and at least 40% of the property is, or is intended to be, used as a home by the borrower or a related person. A loan to a company, or a loan on a property nobody will live in, is unregulated. Some loans that pass this test still fall outside regulation because of specific exclusions. Expert Mortgage Brokers in Limehouse, East London arranges regulated and unregulated bridging loans, and the first question we settle on every case is which side of the line it sits on.
What makes a bridging loan regulated?
A bridging loan is regulated when it meets the FCA’s definition of a regulated mortgage contract. Four questions decide it.
| Question | What the answer means |
| Is the borrower an individual or a trustee, not a company? | A company borrower, unless acting as a trustee, makes the loan unregulated. |
| Is the loan secured on land in the UK? | If not, the regulated definition does not apply. |
| Will the borrower or a related person live in at least 40% of the property, now or later? | If yes, the loan is regulated, unless an exclusion applies. |
| Does an FCA exclusion apply, such as a second charge business loan, an investment property loan or a limited payment second charge bridging loan? | If yes, the loan can fall outside regulation. We check this case by case. |
The 40% test counts the share of the property used as a home. The FCA gives the example of a building where half is a family home and half is let for business meets the test. The borrower does not have to live there. A related person living there can be enough.
What is a regulated bridging loan?
A regulated bridging loan is a short-term loan secured on a property that you or a related person live in, or will live in, and it falls under FCA mortgage rules. The lender must be authorised by the FCA. You get affordability checks and access to the Financial Ombudsman Service.
Typical cases: a homeowner buying before they sell, or someone buying a new home and moving in while a chain completes. If you fall behind, your home can be repossessed.
What is an unregulated bridging loan?
An unregulated bridging loan funds business or investment property that nobody will live in, and it sits outside the FCA mortgage rules. Many bridging loans are taken out by companies, and a loan to a company that is not acting as a trustee is unregulated.
Typical cases: a limited company buying at auction, a developer buying land, or an investor funding a refurbishment of a property to let. Lenders focus on the security and the exit.
Does a landlord’s bridging loan count as regulated?
It does if the landlord or a related person will live in at least 40% of the property. A landlord who buys a flat to refurbish and then moves in has taken a regulated loan. A landlord who buys through a limited company and lets the property has taken an unregulated one.
One more trap: the FCA’s guidance says a business loan to a sole trader or a partnership (in England and Wales), secured on the borrower’s own house, is a regulated mortgage contract. The label “business loan” does not by itself move you across the line. Some exclusions can still apply, for example to certain second charge business loans, so we check the details of each case. Our page on buy to let regulation covers the long-term mortgage side.
When is the regulated test applied?
The test is applied at the time the loan is entered into, and it looks at current and intended use. The FCA definition covers a property that is, or is intended to be, used as a home by the borrower or a related person. Your plans at the point you sign count, not only who lives there that day.
That is why a bridge to buy a home you will move into is regulated even though the property is empty on day one. It is also why you must tell your broker the truth about your plans. Giving inaccurate information about how you will use the property can cause serious problems for you and for the lender.
Why does regulated status change your loan?
Regulated status changes who can lend, which checks apply and which protections you get. Here is the side by side.
| Regulated | Unregulated | |
| Typical borrower | Individual borrowing on a home | Company or investor, property nobody lives in |
| FCA mortgage rules | Apply | Do not apply |
| Affordability checks | Required | Lenders focus on the security and the exit |
| Protections | FCA mortgage rules and Financial Ombudsman Service access | FCA mortgage rules do not apply. Your rights come mainly from the loan agreement and general law |
| Who can lend | Only lenders with FCA permission for regulated mortgages | Lenders do not need FCA mortgage permission |
Our pages on regulated bridging loans and unregulated bridging loans go through each type in detail.
How does Expert Mortgage Brokers arrange regulated and unregulated bridging loans?
Expert Mortgage Brokers in Limehouse, East London arranges regulated and unregulated bridging loans for residential and investment properties across Tower Hamlets, Canary Wharf, Newham and the wider UK. We settle the regulated question first, because it decides which lenders can help and what checks you face. EMB acts as a broker, not a lender. For a regulated loan, check both the lender and the broker on the FCA Register before you sign.
Speak to Jahed Mirza, CeMAP, on 020 7183 1119 or book a free consultation.
Frequently asked questions
What is the difference between a regulated and unregulated bridging loan?
A regulated bridging loan falls under FCA mortgage rules because the borrower or a related person will live in at least 40% of the property. An unregulated one typically funds business or investment property that nobody will live in, or is made to a company.
Is a bridging loan on a buy to let regulated?
Not if a company or investor borrows against a property nobody will live in. It can be regulated if you or a related person will live in at least 40% of it.
Are bridging loans regulated by the FCA?
Only some are. Loans to individuals on a home that you or a related person live in, or will live in, are generally regulated. Business and investment bridging loans usually are not. FCA authorisation of a firm does not mean every loan it arranges is regulated.
What is the 40% rule for bridging loans?
A loan to an individual or trustee is generally regulated when at least 40% of the property is, or is intended to be, used as a home by the borrower or a related person.
Can a limited company take out a regulated bridging loan?
No, unless the company is acting as a trustee. A loan to a company for its own business is not a regulated mortgage contract.
This guide is general information, not personal advice or legal advice. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Property used as security for any bridging loan may be repossessed if the loan is not repaid. Not all bridging finance is regulated by the Financial Conduct Authority. Expert Mortgage Brokers is a trading name of LQ Property Finance Ltd, authorised and regulated by the Financial Conduct Authority (FCA Ref: 758816). Registered in England and Wales. Registered office: 162 Goodmayes Lane, Ilford, IG3 9PR. Trading address: 558 Commercial Road, Limehouse, London E14 7JD. EMB acts as a broker, not a lender.
Sources: FCA Handbook, PERG 4.4 | Regulated Activities Order, article 61A | FCA Handbook, MCOB 1
