Bridging loans stand out as a pivotal solution for individuals and businesses needing swift, short-term funding. These loans are often utilised to ‘bridge’ the gap between an imminent payment obligation and the availability of longer-term financing or incoming funds. However, as with any financial product, circumstances can change, leading borrowers to wonder: Can you refinance a bridging loan?

Refinancing a bridging loan refers to the process of replacing your current bridging loan with a new loan, potentially with different terms, interest rates, or a different lender. This could be sought for various reasons, including securing a lower interest rate, extending the loan term, or consolidating debt. The feasibility of refinancing a bridging loan hinges on several factors, which we’ll delve into, shedding light on the practicalities and considerations involved.

Understanding the Context

A bridging loan, by design, is a short-term finance solution. It typically spans from a few months up to 24 months, offering a lifeline in scenarios such as purchasing a new property before selling an existing one, completing property development projects, or facilitating quick purchases at auction. Given their nature, the interest rates for bridging loans are generally higher than those for traditional, longer-term loans.

The Possibility of Refinancing

Yes, refinancing a bridging loan is possible and can be a strategic financial move under the right circumstances. Doing so can either extend your bridge until you secure long-term financing or improve the terms of your existing bridge. It’s crucial, however, to understand the implications, including potential costs and the impact on your overall financial strategy.

When to Consider Refinancing

• Interest Rates Drop: If the market’s interest rates have fallen since you took out your bridging loan, refinancing could reduce your interest expenses.
• Extension of Project Timeline: Should a property development project take longer than anticipated, refinancing can provide additional time to complete the project or sell the property.
• Improved Financial Position: If your credit rating or financial stability has improved, you might qualify for a loan with better terms.

Key Considerations

• Costs: Refinancing a bridging loan might incur various costs, including exit fees from your current loan, arrangement fees for the new loan, and legal fees. It’s vital to calculate these costs to ensure that refinancing is financially beneficial.
• Lender’s Terms and Conditions: Lenders have specific criteria for refinancing bridging loans. It’s important to review these terms meticulously to ascertain eligibility.
• Valuation: The property used as collateral will need to be revalued as part of the refinancing process. An increase in property value could positively influence the loan terms offered.

The Process of Refinancing

To refinance a bridging loan, start by assessing your current financial situation and the terms of your existing loan. Next, explore the market to find alternative financing options that better suit your needs. Engaging with a financial advisor or a broker specialising in bridging finance can provide valuable insights and access to competitive rates.

Upon selecting a suitable lender, you’ll need to submit an application, complete with supporting documentation regarding your financial status and the property in question. The lender will then conduct due diligence, including a property valuation, before offering terms for the new loan.

Refinancing a bridging loan is indeed a viable option for borrowers under certain conditions. It requires a thorough analysis of your financial situation, the market, and potential costs involved. The team at Berkshire Capital Finance can assist with careful planning and consideration, get in touch with us if you would like to understand how refinancing can offer offer a path to improved loan terms, extended timelines, or reduced financial strain, aligning with your overarching financial goals. At Berkshire, we are passionate about lending. Our experienced team is skilled in matchmaking borrower’s requirements to loans they will love!

We’ll consider most applications and lend to a wide range of borrowers:

• Experienced developers
• Portfolio landlords
• First-time landlords
• HMO landlords
• Individuals
• UK residents
• Foreign Nationals
• Limited companies
• Inexperienced borrowers considered
• Borrowers with some adverse credit history considered

And we partner with amazing brokers!

For flexible lending and competitive rates that you’ll love, call our New Business team today, or contact us.