Can I Refinance A Bridging Loan?
Can I Refinance A Bridging Loan – A Simple Guide
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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Author: Gary Hemming CeMAP CeFA CeRGI CSP
20+ years experience in bridging loans
If you are looking to refinance a bridging loan to save money or buy time, find the best deal with ABC Finance.
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:
- 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.
- Raise capital to complete a project.
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.
If you think you could qualify and would like to apply for a bridging loan to refinance your current finance facility, get in touch now.
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.
We offer a range of specialist bad credit bridging loans for borrowers in this situation.
Who can refinance a bridging loan?
We’re able to offer re-bridging loans to the following applicants:
- Pension Funds.
- Individuals.
- Partnerships or LLP’s
- Limited Companies, including Offshore.
How to refinance a bridging loan
What is the application process?
The process works as follows:
- 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.
Types of re-bridging loans
Are there different types of re-bridging loans?
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
Here are some of the questions that we come across from clients in this situation.
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.
How do you pay back the loan?
The bridging loan can be paid back by either sale or refinance of your property.
However other repayment options are available, such as inheritance, cashing in shares or pensions or sale of other assets.
Is there an age limit?
Most bridging lenders have a maximum age limit of 85 years old for customers, however as a broker we have lenders available with no maximum age limit.
Can ABC Finance help me find the best deal?
Yes, as ABC Finance are a whole of market broker, our experienced bridging loan advisors will look at your circumstances and offer you the best deal based on these.
Why work with ABC Finance?
ABC Finance Ltd were founded in the year 2000, therefore we have many years’ worth of experience in re-bridging loans. There probably isn’t a scenario we haven’t seen before.
We have helped many satisfied clients who have approached us looking to refinance a bridging loan.
Is this type of finance regulated in the UK?
If the loan is secured against your home or a property you plan to live in, this is a regulated bridging loan and is regulated by the FCA. The exception is if the loan is arranged as a second charge bridging loan to be used for business purposes.
If the loan is a second charge for business purposes or secured against an investment property, the loan is non-regulated, in the same way as a standard buy to let mortgage.
Can I refinance a bridging loan that has already been refinanced?
Yes, if you have already taken out a re-bridging loan, some lender will allow you to re-bridge again. The choice of lenders for re-financing a bridging loan twice is limited however.
Lenders will be looking at why the bridging loan has failed for a second time and will only lend if the exit isn’t via more bridging finance.
Bridging loan lenders will want to ensure that the new loan doesn’t leave you in a worse position than you are already in.
How can I calculate my expected costs?
Calculating your bridging finance costs can be simple, especially when using a reputable broker. Here at ABC Finance we will calculate the total costs for you.
The gross loan is the total amount borrowed, including fees and interest for the term of the loan. The net loan is the amount after costs, available to you. The difference between the gross loan and the net loan is how much the loan will cost over the pre-agreed term.
The only things to add are the valuation fees or other fees that are not to be added to the loan.
If the interest is to be paid monthly rather than added to the loan, this must be taken into account. If you borrow £100,000 at 0.7%, the interest is £700 per month.
To calculate costs, use our bridging loan calculator or speak with one of our bridging loan advisors.
Read more – bridging loan to buy refurbish and sell.
