Commercial vs Residential Bridging Loans — Key Differences

The Core Difference: Regulation

The distinction between commercial and residential bridging loans is primarily about regulation, not the type of property. A residential bridging loan is regulated by the FCA when the property will be occupied by the borrower or a close family member. A commercial bridging loan is unregulated — it covers investment property, commercial premises, and any property the borrower will not live in.

This means a buy-to-let investment property — even though it's a house — requires an unregulated (commercial) bridge. And a shop with a flat above that the borrower will live in may require a regulated (residential) bridge for the residential element.

The regulation status affects the lenders available, the speed of completion, the consumer protections in place, and sometimes the rates offered.

How Rates Compare

Regulated residential bridging rates tend to be slightly lower — starting from around 0.44% per month — partly because the properties are standard residential and partly because FCA regulation limits lender risk.

Unregulated commercial rates start from around 0.49% per month for straightforward investment properties, rising to 0.85% or more for complex commercial assets, development sites, or land.

The rate premium for commercial bridges reflects the additional complexity: commercial property valuations are more subjective, exit strategies can be less certain, and the regulatory framework is less restrictive (which means lenders take on more underwriting responsibility).

Property Types and Criteria

Residential bridges cover standard houses and flats that the borrower will live in. Most regulated bridging lenders focus on properties in reasonable condition in England, Wales, and Scotland. Maximum LTV is typically 75%.

Commercial bridges cover a much wider range: offices, retail, industrial, warehouses, HMOs, mixed-use properties, land, development sites, and non-standard residential investment property. Because the range is broader, criteria vary more widely between lenders. Maximum LTV ranges from 65% to 80% depending on the property type and lender.

For development sites and land, LTV is typically calculated on the current value (not the projected completed value), which usually means a lower effective LTV. Some development-specific products use Gross Development Value (GDV) as the basis, allowing higher effective lending.

Which One Do You Need?

If the property will be your home (or your close family's home), you need a regulated residential bridge. This provides FCA consumer protections and typically the lowest rates.

If the property is for investment, rental, commercial use, or development, you need an unregulated commercial bridge. This offers more flexibility on criteria, property types, and deal structures.

If you're unsure — for example, buying a property to refurbish before moving in — speak to a specialist broker. The answer depends on your specific circumstances and the lender's interpretation of the regulatory guidelines.

Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.