Chain break

“The house I want to live in needs work before a lender will touch it”

Where a home needs work before it is habitable, a regulated bridging loan funds the purchase and often the renovation, and is then repaid by a residential mortgage once the property is finished. Fewer lenders operate in regulated bridging, and the process includes affordability and suitability checks.

An illustrative situation, not a client case study. It describes the kind of enquiry this market sees. Any figures are examples, not a quotation, and no credit check or lender decision is involved in reading this.

Sound familiar?

The property has no working kitchen or bathroom, or is otherwise uninhabitable
You intend to live in it yourself once the work is done
A mortgage lender has declined on the condition of the property
You have the deposit and the works budget but not the whole purchase price

The situation

Buying a renovation project to live in sits awkwardly between two markets. It is a regulated transaction because it will be your home, but the property fails the condition test that regulated lenders apply. The result is that a lot of buyers assume it simply cannot be done.

It can, through regulated bridging — but the lender pool is narrower than for investment bridging, the process is more involved, and the exit mortgage needs to be credible from the outset.

Why the usual lenders say no

Residential lenders require the property to be habitable at the point of completion.
A retention for works is sometimes offered, but rarely covers a property with no kitchen or bathroom at all.
The valuer’s report on condition governs the decision, and it is not usually negotiable.

What usually works

A regulated bridge with a works element

Funds the purchase against the current value, with the renovation either self-funded or released in stages. Terms are usually up to twelve months on regulated cases.

The exit mortgage agreed in advance

The strongest evidence you can give a bridging lender is a decision in principle from the residential lender who will take over once the property is habitable.

Realistic works budgeting

Renovation costs overrun. The term needs to cover the works, a contingency, and the mortgage application afterwards.

Roughly how the numbers look

Illustrative figures for this situation
Example purchase price	£260,000
Renovation budget	£45,000
Expected value once habitable	£360,000
Exit	Residential mortgage at the improved value
Term	12 months

Regulated bridging requires an affordability and suitability assessment even where interest is rolled up and there are no monthly payments. These are examples to show the shape of a deal, not a quotation. Work out your own figures in the bridging calculator.

What we would need from you

Photo ID and proof of address for every applicant
Proof of income — payslips, or two to three years of accounts if self-employed
Three to six months of bank statements
A costed schedule of works and who will carry it out
Planning permission or building regulations approval where required
A decision in principle from your intended mortgage lender, where possible

Things that catch people out

Budget for somewhere to live during the works. Lenders will ask, and so should you.
Building regulations sign-off is usually needed before a mortgage lender will lend. Factor that into the term.
If the works are structural, this may be a heavy refurbishment case rather than a simple bridge.

Questions we get asked

What makes this a regulated loan?

Broadly, a bridging loan is regulated when it is secured against a property you or an immediate family member live in or intend to live in. That brings FCA protections and a suitability assessment, and narrows the lender panel.

Will my income be assessed?

Yes. For a regulated bridge the lender must consider affordability and suitability, even where interest is rolled up and nothing is payable monthly.

How long can a regulated bridging loan run?

Usually up to twelve months. It is designed as a genuine short-term arrangement with a defined exit, not an open-ended facility.

The product that usually fits

See how it works

Every case is different. A specialist will confirm what actually fits yours.

Rather talk now?

020 4525 4876

9:00am – 5:30pm, Monday to Friday

Keep reading

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