Rebridging Loans

A Bridging Loan is, put simply, a short-term loan that is secured against a property. The loan can be used - like a mortgage - to buy the property itself, or as a way of raising funding for any other business purpose.

It’s known a Bridge, or Bridging Loan, because it is designed to bridge a short-term funding gap. Bridging Loans have a relatively high cost and are intended to be repaid quickly, either by the sale of the property or by refinancing with another finance product designed for the long-term, such as a mortgage.

Bridging Loans are high-cost funding, but they have two great advantages. They are very quick to arrange and they can be used on property that is not suitable for mortgage lending.

After securing a Bridging Loan, most people will seek to refinance with a mortgage provider as a mortgage can provide long-term funding that is more affordable.

However, they can run into problems if development work overruns or for any other reason it is not possible to replace a Bridging Loan with a mortgage. Not only are the basic costs of any bridge high, but there may also be high penalty charges if the loan is not repaid on the schedule agreed when it was taken out.

The costs involved can mean serious financial problems.

The solution: Rebridging

You can find yourself unable to exit a Bridge Loan for a number of reasons. Bridges tend to have a maximum term of two years, and many must be agreed over much shorter periods. This can be a problem when planning permission takes longer than expected, contractors have been delayed or there have been difficulties with building works. 

Sometimes, it can simply be that the duration of the original Bridge Loan was too short. Your bridging provider may be unwilling to extend your funding, or only do so under punitive terms.

The solution may be to refinance with a Rebridge Loan.

Rebridging may help you:

• Extend the term of funding - giving you additional time to finish work on a property and ensure it is suitable for other types of funding
• Provide additional time for negotiation - it may take longer than expected to arrange the most appropriate long-term funding
• Reduce costs - if you already have a bridge which is proving costly, Rebridging may give you the opportunity to secure a better deal
• Increase borrowing - if your costs are higher than expected, Rebridging may help you access additional funding

What does Rebridging cost?

Short-term funding is always more costly than longer-term lending. Bridging Loans, therefore, have a relatively high cost.

The interest rates you may be charged could vary depending on your circumstances and your business, and the deal that needs funding. The reasons for needing Rebridging will have an impact on the interest rate also. If the Rebridge is simply to save costs, a relatively low rate could be achieved. If the existing loan has come to the end of the term because the property hasn’t sold, the LTV could be restricted and a higher interest rate charged.

In addition to the monthly interest cost, lenders charge a loan arrangement fee – a fee for setting up the loan. This fee is usually 2% of the total loan amount, although this can sometimes be discounted to as low as 1%, especially on larger loans. Fees and interest can usually be rolled up and settled with a single repayment.

Why you need Rangewell to find the Bridging solutions that are right for you

Because of the large sums involved in property purchase, even a fraction of a percentage point can make a substantial difference to what you actually pay for a bridge. There are many different lenders who may be prepared to offer funding. However, each lender has their own approach to interest rates and fee arrangements and finding and comparing offers demands an expert eye.  

At Rangewell, we have the expert knowledge that can not only help you secure the funding you need - it can save you a great deal of cash.

We can help you use Bridging Loans as a tactical source of funding for the short-term, and then work to find the most competitive source of long-term funding to replace them.