Regulated Bridging Loans
Where a facility is secured against a property occupied, or genuinely intended to be occupied, by the borrower or a close family member, it falls under FCA regulation as a regulated mortgage contract – a distinct assessment and conduct framework to the unregulated investment and commercial bridging that makes up most of our transactions.
Many borrowers only discover that their bridging loan is regulated after they have chosen a lender. This page explains the 40% occupancy test that decides it, what regulation changes in practice, and how to work out which side of the line your own case sits on before you apply.
At a Glance
| Trigger | 40% or more of the property occupied, or intended to be occupied, as a dwelling by the borrower or a close family member |
| Legal basis | Article 61, Regulated Activities Order; FCA Handbook guidance at PERG 4.4 |
| Borrower | An individual or trustees. Loans to limited companies are generally unregulated. |
| Applies to | Both first and second charge facilities |
| When it began | First-charge regulated mortgages have been regulated since October 2004; second charge lending came under FCA regulation on 21 March 2016 |
| Typical term | Usually up to 12 months |
| Protections | Affordability assessment, documented suitability, Financial Ombudsman Service access |
Important: Our Regulatory Position
Global Financing Services Ltd, which trades as Platinum Global Bridging Finance, is not authorised by the Financial Conduct Authority, and the bridging and commercial lending we arrange is unregulated. If your case turns out to be a regulated mortgage contract, it must be advised on and arranged by an FCA-authorised firm and lent by an FCA-authorised lender. We will tell you at the outset if your case falls on the regulated side, so you can take regulated advice, rather than trying to structure around the rule. The rest of this page is general information to help you understand the test, not regulated advice.
What Actually Triggers Regulation
Under Article 61 of the Regulated Activities Order, a loan is a regulated mortgage contract when all of the following are true:
- The lender provides credit to an individual or to trustees.
- The loan is secured by a first or second legal mortgage on land in the United Kingdom.
- 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.
This is a property-and-occupancy test set out in the FCA Handbook, not a matter of borrower preference or how a facility is described. It follows the actual or intended use of the security. The purpose of the loan is irrelevant to the definition.
Who Counts as a Related Person
The test is met where the borrower or a close family member occupies, or intends to occupy, the property. Close family generally means a spouse, civil partner or partner, parent, child, brother or sister, and certain other relatives. A property bought to house a family member is therefore treated in the same way as one the borrower will live in personally.
Why the 40% Test Matters on Mixed-Use Security
For mixed-use property, the test looks at how much of the secured land is used as a dwelling. In practice, lenders and lawyers commonly measure this by floor area rather than by value or by how the property is marketed. A building where at least 40% is used, or is intended to be used, as a home can trigger regulation even where the balance is let commercially, while a residential-looking property purchased purely for investment, with no genuine occupation intention, typically remains unregulated.
Quick Guide: Is It Likely to Be Regulated?
| Scenario | Likely status |
| Individual buying a new home before their existing home sells | Regulated |
| Owner-occupier funding renovation of their own home | Regulated |
| Second charge on your own home to raise capital for any purpose | Regulated |
| Sole trader or partnership borrowing for business, secured on their own home | Regulated |
| Limited company buying an investment property | Unregulated |
| Individual buying a property to let entirely to unrelated tenants, with no occupation intended | Generally unregulated |
| Landlord refurbishing a property they intend to live in | Regulated |
This table is a guide only. The facts of each case decide the answer, and borderline cases should be checked with an FCA-authorised adviser or a solicitor.
Both First and Second Charge Structures
Regulation attaches to occupancy, not to charge position. A second charge facility secured behind an existing mortgage on a client’s own residence is assessed under exactly the same regulated framework as a first charge facility on the same property, provided the occupancy test is met.
Intended Occupation: Empty Properties Still Qualify
A property that is vacant at the point of application is not automatically outside regulation. Where there is a genuine, evidenced intention for the borrower or a close family member to occupy the property, once purchased or once works are complete, the intended-occupation limb of the test applies. The intention must be documented clearly and honestly at application stage, since misrepresenting it carries real consequences for borrower, broker and lender alike.
Why a Business-Purpose Declaration Does Not Override the Facts
Stating that funds are for business purposes does not automatically move a case outside the regulated perimeter if the underlying occupancy facts indicate otherwise. A loan to a sole trader or partnership for business purposes that is secured on their home can still be a regulated mortgage contract. Credible supporting evidence is required before a case can properly be treated as exempt, so the classification is worked out at the outset of every enquiry rather than assuming a stated purpose settles it.
Why Companies Are Different
A loan made to a limited company is generally unregulated, whatever the property is used for, unless the company is acting as a trustee. This is why most investor bridging is unregulated and is routinely made to a company or special purpose vehicle. It is also why classification matters so much for individuals: the same property can sit on either side of the line depending on who borrows and who will live there.
What Regulation Provides
A regulated facility carries a formal affordability assessment, a documented record of the suitability of the recommendation made, and access to the Financial Ombudsman Service should a dispute arise. Terms are typically capped at around 12 months, reflecting the more conservative underwriting that regulation encourages. The lender must also be satisfied that your exit, such as a sale or a refinance, is realistic and affordable, and the loan cannot rely on rolling up interest without that being assessed.
Cost Is Not Necessarily Higher
Regulated bridging on strong owner-occupied residential security is not automatically more expensive than unregulated bridging at equivalent leverage. The deeper resale market typical of owner-occupied residential property, combined with the affordability discipline the regulated framework requires, can price competitively rather than carrying a straightforward premium. It is worth benchmarking properly rather than assuming regulation means a higher cost by default.
Common Regulated Scenarios
- Purchasing a new home ahead of an existing sale completing
- Chain-break transactions where your own home is involved
- Funding renovation of an owner-occupied property before it meets standard mortgage criteria
- An owner-occupier auction purchase
- Raising capital as part of a matrimonial settlement, such as buying out a co-owner of a shared family home
- Releasing funds against your own home for a short period before a sale or remortgage
What Happens If a Case Is Misclassified
Lending in a regulated case without the correct authorisation and conduct process can have serious legal consequences for the lender and the people arranging the loan, and it can affect the borrower’s position too. That is the main reason classification is settled before anyone discusses rates or lenders. If you are unsure whether the occupancy test applies to you, say so at the start. It is far easier to get it right at the beginning than to unwind it later.
Second Charge Structures on Owner-Occupied Property
Our Second Charge Bridging Loans page covers the mechanics of raising capital behind an existing charge. Where the security property is your own residence, that facility is assessed under this same regulated framework.
Unregulated Alternatives
Where borrowing is genuinely for investment, buy-to-let or commercial purposes with no occupation intention, and particularly where the borrower is a company, unregulated bridging is the appropriate structure, typically offering broader flexibility on term and structure. Our Light Refurbishment Bridging Loans, HMO Bridging Loans and HMO Finance pages cover common unregulated use cases relevant to investment property, and our Bridging Loans page gives the full overview.
How to Work Out Where You Stand
- Who is the borrower? An individual or trustees, or a company?
- Who will live in the property? You, a close family member, or no one?
- How much of it? Whole property, part of it, or a mixed-use building?
- What is the security? First or second charge, and over which property?
- Take advice if any answer points to occupation. A regulated case needs an FCA-authorised adviser and lender.
Frequently Asked Questions
What actually triggers regulation on a bridging facility?
Whether the borrower or a close family member occupies, or genuinely intends to occupy, at least 40% of the secured property as a dwelling, and the borrower is an individual or trustees. It is a property and occupancy test, not a matter of choice.
Can a second charge facility be regulated?
Yes. Regulation attaches to occupancy, not charge position, so a second charge behind an existing mortgage on your own home is assessed under the same regulated framework.
Does a currently empty property fall outside regulation?
Not necessarily. Genuine, evidenced intended occupation can still bring the facility within the regulated perimeter.
Is a bridging loan to a limited company regulated?
Generally no. Loans to companies are treated as unregulated unless the company is acting as a trustee.
What protections does regulated status provide?
A formal affordability assessment, a documented suitability record, and access to the Financial Ombudsman Service.
How long can a regulated bridging loan run?
Regulated bridging is typically offered for up to around 12 months, shorter than many unregulated facilities.
Is regulated bridging more expensive than unregulated?
Not necessarily. Owner-occupied residential security can price competitively at equivalent leverage, so it is worth benchmarking rather than assuming a default premium.
Can Platinum Global Bridging Finance arrange a regulated bridging loan?
No. We are not FCA-authorised and arrange unregulated lending only. If your case is regulated we will say so at the outset so you can take advice from an FCA-authorised firm.
Get in touch with details of the property and its intended use, and we will tell you which side of the regulatory line your case is likely to fall on before any lending is structured.