Unregulated Bridging Loans: What They Are and Who Uses Them

In broad terms, a loan is a regulated mortgage contract when three things are true at the time it is made: the borrower is an individual (or trustees), the loan is secured by a first or subsequent charge on land in the UK, and at least 40% of that land is used, or is intended to be used, as or in connection with a dwelling by the borrower or a related person. If any of those is missing, the loan is generally outside the regulated mortgage regime. Regulated bridging loans, like other regulated mortgages, can only be arranged by firms authorised by the Financial Conduct Authority for that activity.

Related person covers close family: a spouse or civil partner, someone the borrower lives with as a partner, and parents, siblings, children, grandparents and grandchildren. A bridge on a flat that your adult son will live in is therefore treated in the same way as a bridge on your own home.

Intended use matters as much as current use. Buying an empty house that you plan to move into makes the loan regulated even though nobody lives there on the day of completion. Equally, a house you have moved out of and let to unrelated tenants is investment property.

The borrower matters too. A loan to a limited company is not a regulated mortgage contract, because the company is not an individual. That is one reason most investors and developers borrow through a special purpose vehicle. It is not, however, a way around the rules: lenders will look through a company structure where the reality is a director buying their own home, and many will simply decline.

Two further points are worth knowing. First, individuals who let property without doing so as a business, for example an inherited house let to tenants, can fall within the separate consumer buy-to-let regime. Second, lending to individuals can engage consumer credit rules in some circumstances. Both are areas where the lender will make its own assessment, and where we refer the case to an FCA-authorised adviser if it is not clearly business lending. None of this is legal advice: if your case is borderline, ask a solicitor.

The 40% threshold matters most for mixed-use property. A shop or office with a flat above is common security for bridging, and whether the loan is regulated can turn on how much of the building the borrower or their family occupy. In practice the test is usually applied by reference to area, and lenders apply their own approach, so the example below is illustrative only.

Our guide to commercial bridging loans covers mixed-use and semi-commercial security in more detail.

Unregulated bridging is the working capital of the property industry. The typical borrowers are:

What these borrowers share is a clear business or investment purpose and an exit that does not depend on selling or refinancing their own home.

Unregulated bridging finance comes in several types, and most lenders offer more than one. The type you need depends on the project, the security and how certain the exit is.

A closed bridging loan has a fixed repayment date tied to a known event, such as an exchanged sale or a refinance already agreed. An open bridging loan has a clear exit plan but no fixed date within the term. Closed bridges carry less risk for the lender and can price more keenly; most investment and property development bridges are open, because sales and refinances rarely run to a precise date.

A first charge bridging loan is the senior, or only, loan on the property. A second charge bridging loan sits behind an existing mortgage and is useful when you want to raise funds without refinancing a mortgage worth keeping. Our guide to second charge bridging loans explains consent, combined LTV and pricing.

A regulated mortgage lender must assess whether the borrower can afford the loan, using income, expenditure and stress tests set out in the FCA's rules. An unregulated bridging lender does not apply that framework. It lends primarily against the value of the security and the credibility of the exit, with the borrower's experience, credit history and assets as supporting factors.

Because there is no regulatory process to follow, unregulated bridging loans can complete quickly. The practical limits are the valuation, the legal work and the borrower's own readiness, which our guide to fast bridging loans covers. Lenders will also require buildings insurance from completion, with their interest noted on the policy, and vacant or under-works property may need specialist unoccupied or contract works insurance. Arrange insurance early, because it is a common cause of last-minute delay.

With no affordability test, the exit strategy is the lender's main protection. A credible exit strategy names the route, the timing and the evidence: for example, a refinance onto buy-to-let mortgages after a six-month refurbishment, supported by a term lender's agreement in principle and rental comparables. A weak exit strategy, such as a sale in a market with few comparable transactions, will reduce the loan or lead to a decline. Our guide to exit strategies covers the options in more depth.

Pricing on unregulated bridging finance sits within the wider bridging range. At the time of writing (September 2026), with the Bank of England Bank Rate at 3.75%, indicative rates run from 0.55% to 1.5% per month, with arrangement fees of 1% to 2%. What drives the rate within that range is risk: the LTV, the type of security, the strength of the exit and the borrower's credit history. These are indicative figures, not offers. Our guide to bridging loan rates sets out what moves pricing, and the bridging loan calculator models the total cost.

The trade-off for speed and flexibility is that you are outside the FCA's mortgage conduct rules, and more of the risk sits with you. It is worth being clear about what that means.

Some general legal protections for individual borrowers can still apply to unregulated agreements, and many specialist lenders follow voluntary industry codes such as the one published by the Association of Short Term Lenders. Neither is a substitute for reading the facility letter carefully. The terms that matter most are default interest, extension fees, what counts as an event of default, and whether an exit fee applies. Our guide to default interest rates explains how quickly costs can rise if a bridge overruns.

Regulated bridging loans and unregulated bridging loans share mechanics: a short term, a single repayment at the end and interest that is usually rolled up. The differences lie between who can borrow, what the lender must check, who can arrange the loan and how much access you have to formal complaint routes.

Neither type is better in the abstract. For a homeowner bridging a chain break, regulated bridging finance exists to give the protections that situation needs. For a company buying an investment property or funding a property development project, unregulated bridging finance is the right tool, and trying to fit that work into the regulated framework would add cost and delay without adding meaningful protection.

The process is straightforward when you have the right information ready. Start with the occupation question, because it decides which part of the property finance market you need:

If you are unsure whether you need a bridge at all, our guide to alternatives to bridging loans is a good starting point, and the bridging finance guide covers the product from first principles.

Construction Capital arranges unregulated bridging for investors, developers and companies across England, Wales and Scotland through a panel of 100+ lenders. Our founder, Matt Lenzie, has more than 25 years in property finance. If your case is investment, commercial or development lending, submit your deal or read about our bridging loans service. If it involves your own home, we will direct you to an FCA-authorised adviser.