Re-Bridging Loans for Existing Loans – An Ideal Solution

October 30 22:32 2018

The bridging market has grown rapidly in recent years and as it’s done so the number of borrowers who find themselves unable to exit their loans on time has also risen. There can be a large variety of reasons for this situation. Perhaps most typical are the unexpected delays that can hold up a renovation project ranging from unforeseen complications with the building works right through to planning permission issues.

Aside from unforeseen complications with building works it might simply be the case that market conditions have changed impacting on the availability of mortgages or the saleability of an asset intended to provide the exit. A failed exit can sometimes just be down to the original loan period being far too optimistic at the outset.

Whatever the reason, in the past many bridging lenders were at best reluctant and at worst completely unwilling to offer bridging loans to refinance a previous bridging loan. This situation has changed and although some lenders still won’t consider refinancing an existing bridge there are others that will now take a more commercial view.

To consider a re-bridging loan, competent lenders will seek to understand exactly why the previous bridge has not redeemed as planned and they will then need to be convinced that any subsequent loan they advance will be successfully settled on time.

Bridging loans are stereotypically sold as a dual rate product with a ‘discounted’ rate for a defined loan term of say 3,12 or even 24 months but if the loan then goes over the agreed term a ‘standard’ rate is usually applied. The standard rate can often be substantially higher than the discounted with some unscrupulous lenders offering a discounted rate of circa 1%PM that increases to 3-5%PM if the loan goes past its planned redemption date. In such circumstances significant sums of additional interest can quickly accrue.

There are some industry commentators who look at re-bridging in overly simplistic terms stating that it is a bad thing for the industry and irresponsible. They suggest that its indicative of an increasingly competitive market where lenders are being forced to take ever greater risks to obtain market share. In a perfect world every bridging loan would have a clear exit route and be paid off on time or early but we don’t live in a perfect world. As explained above, potential problems and delays can’t always be anticipated by either lenders or borrowers.

Developments can, by their very nature, be complex. If issues arise with a development but the the work is well underway, the developer is competent with a good track record, the residual value of the property has already increased and it’s clear that it can be finished within a set period, then it can make perfect sense for a new lender to provide another bridging loan.

Equally, if property market conditions change due to macro-economic factors or at the simplest level a property sale falls through just before a bridge is due to be settled from the proceeds of sale then a re-bridge can be a brilliant solution for the borrower. In these situations, responsible lenders are prepared to take the time and have the in-house expertise to fully assess a potential re-bridge. Once they understand what’s happened to reach this point they can make an informed decision on whether they are prepared to assist.

The best-informed commentators will point out that not all re-bridges are assessed so rigorously and that there are properties that have been re-bridged several times, with fees spiralling, equity being eaten away and still no clearly defined exit plan in place. Such cases do occasionally occur, but they merely serve to underline the absolute importance of working directly and closely with an experienced and ethical principal lender. Good lenders will ensure positive borrower outcomes and that any re-bridge undertaken is a success.

Still unsure and need to explore your options? Why not consult an expert?

Central Bridging are specialists at re-bridging existing bridge loans with a great track record. When an existing bridge has gone over term we are often able to use our strong industry reputation and contacts to secure a discounted settlement figure before re-bridging the loan.

We are a principal lender offering a range of loan facilities for business use from £100K to £2.5M over periods from 3 to 24 months. Our loans are secured on freehold property across England and Wales.

Crucially you will always speak to a decision maker who will take time to understand you and your situation and unlike some of the bigger banks will then tailor a solution that best suits your needs rather than their own.

Why not give us a call on 03332 400 506 for an informal chat about your options.

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Company Name: Central Bridging
Contact Person: John Clifford
Email: Send Email
Phone: 03332 400 506
Country: United Kingdom