Re-Bridging Loans

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Home » Bridging Loans » Types of Bridging Loan » Re-Bridging Loans

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What is a re-bridging loan?

Re-bridging loans are used to refinance an existing bridging loan if you are looking for a better interest rate, or your existing loan is coming to the end of its term.

Customers generally approach us for a re-bridging loan to either see if we can save them money by moving the loan to a lender with lower rates. Or, alternatively, if their current bridging loan is nearing the end of its term but the requirement for this type of finance is still there.

Read on below to find out more.

Criteria

Below are the main criteria points to consider when taking out a re-bridging loan.

1 Up to 75% Loan to Value (or 100% with additional security).
2 Property in a poor state of repair considered.
3 Rates from 0.48% per month.
4 Loans from £25,000 with no maximum loan size.
5 Borrow from 1 month up to 24 months.
6 Any security considered.
7 Interest can be rolled into the loan.
8 Loans with no early repayment charges available.
9 We will consider any exit route.
10 Refurbishment or conversion accepted.
11 Adverse credit accepted.
12 Loans available throughout the UK.

How much can I borrow?

We are able to fund re-bridging loans up to 75% loan to value (LTV), and can even lend up to 100% LTV with additional security. Funding starts from £25,000 with no maximum loan size.

The amount offered by a lender will depend on your circumstances and the reason why your existing term has expired without the loan being repaid.

Our comparison tool allows you to instantly compare your options, although when refinancing a bridge, your circumstances are key.

As such, talking through your options with one of our re-bridging experts may be the best option.

How much will it cost?

Depending on why the existing bridging loan needs re-bridging, there may be an impact on the interest rate offered. If it is wanted to save costs, a lower rate could be achieved.

If the existing loan has come to the end of the term because the exit strategy has failed, the LTV could be restricted and a higher interest rate charged.

We can offer loans from 0.48% per month up to 50% LTV and can even lend at 0.65% per month at 75% LTV.

In addition to the monthly interest cost, lenders charge a lender arrangement fee – a fee for setting up the loan. This fee is usually 2% of the loan amount, although this is sometimes discounted as low as 1%, especially on larger loans.

How long do they take to complete?

They can be completed in around 5 – 14 days if the property valuation and legal work is done quickly. If there is a deadline for completion you should tell us upfront so we can work to this timescale.

If you’re keen to secure the lowest rates, it might be worth allowing slightly longer for completion as the lender may want to undertake some additional checks.

Bridging finance is usually priced based on the risk presented to the lender in the event of default.

Loans at higher risk of default, with a higher risk exit or at higher loan to values will generally pay higher rates.

How are re-bridging loans assessed?

Applications may come under more scrutiny than standard bridging applications as the lender will want to make sure that they are actually solving the root problem.

As your exit strategy on your current loan has failed, they will want to ensure that the problem is not going to happen again. By offering a bridging loan to an applicant, only for it to fail again, they will only be delaying the problem, rather than solving it.

As such, detail around the planned exit strategy for your existing loan, will be the main issue when the initial assessments take place.

Assuming the exit is considered solid, then the application will proceed in much the same way as a standard application.

The other key considerations for the lender will be:

  • The security property
  • Your credit history (for some lenders)
  • The loan to value requested

Will I have to pay high rates?

Although the application will be seen as higher risk by the lender, the rates charged won’t necessarily be higher than your current loan.

Re-bridging applications are assessed on a case by case basis, so the rate charged will depend on the reason that the first exit strategy failed.

Where the issue is unlikely to be repeated, you will usually find that the rate charged will be lower.

What exit will be acceptable to the lender?

This is key to the success of your application. The strongest exit strategies are refinance to a term loan or sale of the property.

Where you’re planning to refinance to a term loan (mortgage), the lender will want to see evidence that this is possible. Usually, an agreement in principle from your new lender, with confirmation that you will be able to meet their criteria will be required.

Where sale of the property is planned, the surveyor will confirm the likely marketing period for the property. This will be very important as the lender will want to ensure that a sale can be completed before the term of the new loan expires.

The importance of arranging a re-bridge early

We regularly deal with clients who are coming to the end of their term on an existing loan.

From experience, the most important point is that the new loan is dealt with early. Leaving it until the last minute tends to result in a more expensive loan and a higher risk of default.

Some lenders charge high default charges, either a large default fee or high default interest rates.

With the addition of these extra charges, your loan to value will be increased, making it harder to find a new loan.

It’s far better to have the new loan ready to complete and then waiting until the end of your term, rather than rushing to hit a tight deadline.

We’re happy to discuss your circumstances in advance if you feel you may run out of time with your current lender.

What steps should I take if my current term is close to expiring?

Refinancing to a new lender will mean more fees and of course, the effort involved in arranging a new loan.

As such, the first step is to understand what fees would be due in the event of default and whether your lender charges default rates.

From there, discuss your circumstances with your current lender early to understand how they’ll approach a delay in being repaid.

If your current lender is unwilling to support you by extending the loan, a switch to a new lender may be the best option available.

Where appropriate, refinancing to a mortgage rather than another bridging loan may be a cheaper option.

about-the-author-gary-hemming

About The Author

This content was produced by our Commercial Lending Director, Gary Hemming. Gary has over 15 years’ experience in financial services and specialises in bridging loans, commercial mortgages, development finance and business loans. He is widely respected in his field and regularly provides expert commentary for specialist trade publications, specialist business press as well as local and national press.

Gary Hemming CeMAP CeFA CeRGI CSP  -  
Commercial Lending Director

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