Refinance a bridging loan explained

What is a re-bridging loan?

A re-bridging loan, sometimes called a re-bridge, is a new bridging loan arranged to repay an existing one.

This is usually needed when the original bridging loan is nearing the end of its term, or has already gone over term, and the planned repayment has not occurred.

In simple terms, it gives you more time.

That may be the time to sell a property, finish building works, complete a refurbishment, or arrange a longer-term mortgage.

However, re-bridging should not be seen as a simple extension. If the original bridging loan has not been repaid on time, something has not gone to plan. A new lender will want to understand what has happened, what has changed, and how the new loan will be repaid.

Why do people need to re-bridge?

People typically consider re-bridging when their original exit strategy has been delayed or failed.

Common reasons include:

This is one of the most common reasons.

A bridging loan may have been arranged to buy and renovate a property that was not suitable for a normal mortgage at the time.

The plan may have been to carry out the works, make the property mortgageable, and then remortgage onto a standard mortgage.

If the works take longer than expected, the borrower may not be able to repay the bridging loan by the original end date.

Many bridging loans are repaid from the sale of a property.

If the property has not sold, or the sale has fallen through, the borrower may need more time.

A re-bridge can give time to remarket the property and try to achieve a sensible price, rather than being forced into a quick sale at a much lower figure.

Extra money is needed

Sometimes the original budget was not enough.

There may have been extra building costs, delays, professional fees, or unexpected works.

In this situation, the borrower may need to repay the existing bridging loan and raise additional funds simultaneously.

The original plan has changed

Sometimes the original exit is no longer possible.

For example, the plan may have been to refinance, but the property still does not meet lender criteria, or the borrower’s circumstances have changed.

In that case, a different exit route may be needed, such as selling the property instead.

What re-bridging facilities may be available?

Depending on your circumstances, we may be able to look at:

A new bridging loan to repay your existing bridging loan
An extension with your current bridging lender
Repaying the current bridging loan and raising extra funds
Re-bridging where the existing loan is already overdue
Re-bridging where the default interest is being charged
Cases where receivers have been appointed
Cases where repossession is pending or has already started

Going over the term of a bridging loan can be very serious.

If you are already over term, or worried you may go over term, you need to deal with it quickly.

What should you do first?

There are two key questions to look at:

Why has the bridging loan not been repaid?
What is your current lender likely to do?

These two points are important.

If the problem is minor, your existing lender may agree to give you a short extension.

For example, if your sale is completing a few days late, or your remortgage is nearly ready, the lender may be prepared to wait.

But if the problem is more serious, the lender may not be so helpful.

Some lenders will charge a large default fee as soon as the loan goes over term. Some may increase the interest rate. Some may appoint receivers or start enforcement action.

This is why you need to understand the lender’s position before deciding what to do next.

Why has the loan gone over term?

It is important to be honest about why the loan has gone, or may go, over term.

Something has clearly not gone to plan.

The issue may be simple. For example:

The sale is delayed by a few days
Legal work is taking longer than expected
A refinance offer is in place, but has not been completed yet

In these cases, a short extension may be enough.

But the issue may be more serious. For example:

The building works are nowhere near finished
The property is still not mortgageable
The sale has fallen through
The borrower needs more money to finish the project
The planned remortgage is no longer available
The current lender has lost confidence in the exit strategy

Once we know what the problem is, we can look at the options.

Example of a re-bridging situation

A borrower takes out a bridging loan to buy a property that needs major work.

The plan is simple:

Buy the property, carry out the work, make it mortgageable, then remortgage it onto a normal mortgage.

But things do not always go to plan.

The works may take longer than expected. Costs may increase. The property may still not meet lender requirements. The remortgage may not be ready before the bridging loan expires.

In this situation, the borrower may need a re-bridge.

This could give them extra time to finish the work, arrange the remortgage, or sell the property.

Can you stay with your existing lender?

Sometimes the best option is to stay with your existing bridging lender and ask for an extension.

This can be quicker and cheaper than arranging a brand-new bridging loan.

However, this is not always the case.

The lender may charge an extension fee. They may increase the interest rate. They may only agree to a very short extension. In some cases, they may not agree to extend at all.

Before agreeing to an extension, you need to know:

How much will the extension cost
How long does the extension last
Whether default interest applies
Whether the lender will take further action if the loan is not repaid
Whether the extension gives you enough time to sort the problem out

A short extension may seem like the easiest answer, but it is only useful if it gives you enough time.

Can you move to a new bridging lender?

In some cases, it may be better to move to a new lender.

A new facility may give you longer-term breathing room or the ability to raise extra funds.

This can be useful where:

The current lender is charging high default interest
The existing loan is already overdue
Receivers have been appointed
More money is needed to finish the project
The current lender will not agree to a sensible extension
You need more time to sell or refinance

However, a new lender will look carefully at the case.

They will want to know why the original loan was not repaid and why the new exit plan is realistic.

Is re-bridging expensive?

Re-bridging can be expensive.

You may have to pay:

Arrangement fees
Valuation fees
Legal fees
Broker fees
Higher interest rates
Default interest on the existing loan
Exit fees on the current loan

This is why it is important to compare the cost of staying with the current lender against the cost of moving to a new lender.

The cheapest-looking option is not always the best option.

What matters is whether the option gives you enough time and a realistic way out.

Is re-bridging regulated?

Some bridging loans are regulated by the Financial Conduct Authority and some are not.

This depends on the type of property, who lives in the property, the purpose of the loan, and how the borrowing is structured.

For example, a bridging loan secured against a property that you or a close family member lives in may be treated differently from a bridging loan used for business, investment, or commercial purposes.

We can help you understand what type of bridging finance may apply to your situation.

Do not leave it too late

If your bridging loan is close to the end of its term, do not ignore it.

The earlier you deal with the problem, the more options you are likely to have.

Once the loan is overdue, default interest may accrue, costs may rise, and the lender may take action.

If receivers are appointed or repossession starts, the situation becomes much more difficult.

We can help

We regularly deal with bridging loans that are close to expiry, over term, or already in difficulty.

We can look at your current position, discuss the options, and help you understand whether it may be better to:

Extend with your existing lender
Move to a new bridging lender
Raise further funds
Sell the property
Refinance onto a longer-term mortgage
Put a different exit strategy in place

If you are over term or worried you may be, speak to us as soon as possible.

The sooner you act, the better chance you have of getting things back on track.

Important information

Bridging finance is short-term lending and can be expensive. Your property may be at risk if the loan is not repaid.

Some bridging loans are regulated by the Financial Conduct Authority and some are not. This will depend on your circumstances and the purpose of the loan.

We will explain this clearly before making any recommendations.