Can I Refinance A Bridging Loan?
Find out if you can refinance a bridging loan in our simple guide. Enquire now and get the best deal with ABC Finance.
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Refinance a bridging loan explained
What is a re-bridging loan?
Re-bridging is the process or paying off an existing bridging loan with a new one.
Historically, lenders were less willing to lend to repay an existing bridging loan although now it’s becoming more and more common. Due to this, lenders are taking a more flexible approach and are more willing to offer re-bridging loans.
How can refinancing a bridging loan benefit me?
Re-bridging can benefit you in many ways, saving you money, allowing you to borrow more money or to buy time to sort out your plans.
Re-bridging loans can take away some of the pressure you’re facing with your current loan.
How do they work?
Re-bridging loans allow you to repay an existing bridging loan, with a new loan. Like a standard bridging loan, they are secured on property.
What is a bridging loan refinance used for?
The main uses of re-bridging are:
- Raise capital to complete a project.
- Refinance onto a cheaper deal.
- Repay your existing bridging loan because the term has ended.
- Buy more time to follow through with a sale or refinance.
Bridging loan refinance lending criteria
Will I qualify for a bridging loan refinance?
If you are looking to refinance a bridging loan, lenders will look at the following lending criteria:
- The reason for the loan.
- Your equity position.
- The property value and suitability for the loan.
- Your credit history.
- Your repayment strategy.
- Details of why the existing bridging loan wasn’t repaid or why a re-bridge is needed.
If a lender is happy with the above, it is likely that you qualify for a re-bridge. We’re able to offer finance for most borrowers, as long as there is enough deposit or equity to satisfy lenders.
What loan term can you offer?
Lenders offer loan terms from 1 month up to 24 months, in some cases 36 months are available. The term is often determined by your loan repayment plan, often call the exit route. The proposed loan term needs to be realistic.
As you already have a bridging loan in place, the new lender will need to be confident that you are able to repay them on time. If your current bridging finance is already over term, the new lender will be cautious around the term they offer.
If you are to refinance the loan to exit, the term can be shorter and will depend on how long the refinance will take.
What checks will the lender carry out during the application process?
The lender will want to know what the loan will be used for, your credit profile and the property to be used as security for the loan, to ensure it’s suitable for lending against.
They may also ask for a copy of your original loan offer for your existing bridging loan.
Will I qualify if I have bad credit?
Yes, lenders do consider finance applications from customers with varying credit profiles. Your credit history will often impact the interest rate you will pay but ultimately the lender will be assessing the security for the loan.
It can be common for clients looking to re-bridge to have some form of adverse credit, especially if you have defaulted on your current bridging finance.
In some cases, the current lender has repossessed the property and we’re still able to re-bridge the loan.
Who can refinance a bridging loan?
We’re able to offer re-bridging loans to the following applicants:
- Individuals.
- Partnerships or LLP’s
- Limited Companies, including Offshore.
- Pension Funds.
How much can I borrow?
Minimum and maximum loan sizes
We can refinance a bridging loan with loan sizes ranging from £10,000, with no maximum loan size.
The max loan offered by a lender is generally decided by your repayment plan, this ensures that you are able to repay the loan by the end of the term, without a shortfall.
Loan to value requirements
The maximum loan to value (LTV) currently offered on a re-bridge is 75% for residential property on a non-regulated loan basis.
For a first charge regulated re-bridge, 70% LTV tends to be the maximum loan currently offered by lenders.
If you wish to refinance a bridging loan on a second charge basis, 65-70% is the maximum loan amount.
Depending on the asset, 60-65% loan to value is the maximum loan amount offered on a commercial re-bridge.
This is generally case-by-case, so for an accurate loan quote speak to one of our bridging loan advisors.
Does income affect my maximum loan?
In most cases no, especially when the loan is to be paid back with sale of the asset.
If however you are looking to take out a mortgage to pay back the loan, lenders will look at whether you have enough income to support this.
Exit strategy & the impact on maximum loan
When looking at an exit strategy for repaying a bridging loan, this is usually by means of the following 2 options:
- Sale of the security property or other property owned, the lender will make sure that the property will be sold for enough to clear the loan and will likely take advice from a property valuer.
- Refinance of the loan, you may be looking to take out a standard mortgage to repay the bridge. The bridging loan lender will assess the maximum loan on remortgage to work out their maximum loan offered.
Re-bridging loan interest rates & costs
What interest rate will I pay?
When you refinance a bridging loan, the interest rates start at 0.45% for non-regulated loans. This interest rate is geared towards properties that have been refurbished or developed.
A regulated re-bridge will likely cost 0.70% – 0.9% per month.
A commercial, or semi-commercial re-bridge will cost 0.85% – 1.15% per month in most cases.
Speaking with a specialist bridging loan broker such as ABC Finance is valuable, we’ll source the best loan offer for your circumstances. We offer market leading bridging loan rates & fees.
Are there other set up costs to consider?
Yes, there are other set up costs that should be taken into account:
- Lender arrangement fee – all bridging loan lenders charge a fee to set up the loan, this is usually between 1-2% of the loan amount and can be added to the loan. 2% is fairly standard, lenders may reduce fees on larger loans. Some lenders charge this fee on the gross loan, and some on the net loan.
- Exit fee – some lenders also charge a fee on repayment of the loan. This fee is usually 1% of the loan or an extra month’s interest, and in both cases, can be added to the loan. We always aim to use a bridging loan lender with no exit fee.
- Valuation fee – some lenders require some form of valuation of the property to ensure it is suitable security for the loan. Much like a mortgage, these fees increase as the property value increases.
- Legal fee – there is a fee to pay for the legal work involved in setting up the loan. You are usually expected to pay the lenders legal costs, as well as your own.
- Broker fee – some bridging loan brokers charge broker fees for arranging bridging loans. This may be a flat fee or a percentage of the loan amount. Where charged, it is usually payable on completion but in some cases, brokers charge upfront fees. ABC Finance don’t charge broker fees for arranging bridging loans.
Are there any upfront costs to pay?
In most cases there are upfront costs payable before the loan completes. Valuation and legal fees are payable before completion of the loan. Some lenders offer a free automated valuation and add legal fees to the loan.
If you require a bridging loan with no upfront fees, please let us know upfront as this will help us decide which lenders to speak with. If you opt for bridging finance with no upfront fees, you usually pay a higher interest rate on your borrowing.
Do ABC Finance charge fees for arranging re-bridging finance?
We don’t charge a broker fee for arranging bridging loans of £100,000 or above.
How to refinance a bridging loan
What is the application process?
– You can speak with lenders yourself, or speak with an experienced bridging broker to run through your finance needs.
– When a lender, and product is chosen, your loan application form and supporting documents are submitted.
– The loan underwriter will assess your application and if happy to proceed, will instruct the valuation or run an automated valuation (AVM).
– When the valuation report is back, if the details are satisfactory the offer will be issued and legals instructed.
– Both yours, and the lenders solicitor will work towards a completion date.
You can instruct valuations and solicitors before underwriter assessment. This will speed up the process but is at your cost should the underwriter decline your application.
Should I work with a broker or go to a lender direct?
Working with an FCA regulated bridging loan broker definitely has its benefits, especially if there is no broker fee. A good broker will know exactly which lenders to deal with and will compare bridging loan interest rate for you. ABC Finance Limited also assist with your loan application and interact with the lender, valuer and solicitors for you. We’re also available after loan the loan has completed, should you need us, to ensure your exit plan is on track.
You are free to speak with lenders yourself and compare bridging loan deals, however speaking with several lenders and comparing loan offers, including interest rates and fees can be time consuming.
What documents will I have to provide?
To refinance a bridging loan, both brokers and lenders will require the following documents:
- Application form including a loan summary and details of exit.
- Proof of photo identity (ID), i.e. Passport copy or driving licence.
- Proof of residency, i.e. a utility bill dated within the last 3 months.
- Last 3 months personal bank statements.
- Proof of income may be requested.
How long does the application process take to complete?
A typical re-bridging loan application takes from 3 days to 4 weeks.
The completion time from applying for the loan to completion will depend on several factors, such as:
- Whether a physical valuation or an AVM is needed.
- The lenders application processing time, including their current workload.
- Whether both the lenders, and your solicitor has capacity to complete within a deadline.
- How quickly you are able to send the required forms and documents.
Of course, some lenders can release funds quicker than others, if you have a deadline to adhere to you should make us aware of this from the outset. We can then choose a lender who can meet the deadline, and assist you in streamlining the process.
How is my application assessed?
Your application is assessed on a case-by case basis by the lender. They will want to ensure that the re-bridging loan will put you in a better financial position than by not refinancing.
If your current bridging loan has failed, they will want to know why this has happened and your plans to make sure that this doesn’t happen with the new loan.
Yes, there are different types of re-bridging loan, here are some examples:
First charge re-bridging loans
A first charge bridging loan is secured on a first charge basis and will offer the lowest interest rates.
Second charge re-bridging loans
Second charge bridging loans sit behind your current lender on a second charge basis. Due to the increased level of risk, interest rates are usually higher when compared to first charge bridging.
Bad credit re-bridging loans
We are able to offer bad credit bridging loans for applicants with adverse credit looking to re-bridge. This can include mortgage arrears, CCJ’s and defaults, IVA’s and bankruptcies and repossessions.
Commercial re-bridging loans
Commercial bridging loans are available for re-bridging and are secured on commercial property such as pubs and restaurants, hotels, B&B’s and guesthouses, retail units and industrial units or warehouses.
Semi commercial re-bridging loans
A semi-commercial re-bridging loan is secured on semi-commercial property such as retail units with flats above, mixed use sites that contain both residential and commercial property and live-work units.
Frequently asked questions
Is re-bridging finance risky?
Not usually, however any form of borrowing can carry some element of risk. Re-bridging finance tends to be more of a calculated risk because the lender will carry out various checks, such as valuation and legal work, to minimise the risk of the loan failing.
ABC Finance will assess your application upfront to make sure your loan is placed with the best re-bridging lender for your situation.
What are the alternatives to re-bridging finance?
You could speak to your existing bridging finance lender to ask them if they have options for you. This can include extending the term, re-writing the loan or releasing more money. We’re happy to do this on your behalf.
Alternatively, you could sell or refinance the property to repay your current bridging loan facility.
You can speak with one of our bridging loan advisors who are on hand to discuss options. As a whole of market lender, we’re able to look at various refinance options.
Can I repay my loan early?
Yes, you can repay your bridging finance facility early and at any point during the term. There may be a minimum term that the loan can be held for in respect of interest payable, this is usually the first full months interest.
Some lenders charge longer minimum interest periods, i.e. 3 months. If you feel that you would need the loan for less time than this, you should discuss this upfront.
Do I need to provide proof of income?
Generally yes, however this depends on the reason for the loan and planned exit route.
Some lenders don’t require proof of income at all, these are known as non-status bridging lenders. If you require a non-status bridging loan, you should make us aware of this upfront.
What is the minimum deposit?
When you refinance a bridging loan, the minimum deposit needed in most cases is 30% plus fees and interest for the term of the loan.
If the re-bridge is to repay refurbishment bridging finance, some lenders may only require 20% plus fees and interest.
You can offer extra security by way of other property to minimise the deposit required.
Are these loans hard to get?
No, refinancing a bridging loan is much the same as a standard bridging loan.
As re-bridging finance is becoming more and more popular, more lenders allow you to refinance a bridging loan.
Read more – bridging loan to buy refurbish and sell.
