Cutting Bridging Loan Repayments With Proactive Restructuring Refinance

By Rose Brown
Content writer
Last update: 18 October 20221 minute read
Cutting Bridging Loan Repayments With Proactive Restructuring Refinance

For a client who specialised in redeveloping property bought at auction into viable businesses, the need for a better loan arrangement than their existing bridging loan was clear. By extending the term and reducing rates, the client could enjoy a more manageable loan and greater cash flow.

Table of Contents

Bridging loans are a useful product that allows a lender to provide finance to borrowers who need cash quickly. For our client, a bridging loan allowed them to rapidly move on an opportunity in a property auction and secure a large detached house. 

However, the client had plans for the property that demanded more investment and would increase its overall value. Unfortunately, the bridging loan was for a fixed amount, and repayment terms were strict. 

Recognising that, following a change of use, the property would have greater value, the client approached our team to ask about refinancing to a different loan that would be more manageable and, hopefully, provide more cash to use in the redevelopment project. 

Why was there a problem?

Care homes are valuable businesses, but they require experience and the proper implementation to run successfully. For lenders, this often leads to hesitation and deliberation before investment. This sometimes forces borrowers to choose alternative sources of finance, such as bridging loans.

In this case, the client had accepted a bridging loan solely to secure the property at auction. Once purchased, they had a plan to redevelop it into a care home, which means a heavy conversion involving a Change of Use application and construction to change the internal layout and facilities in the home. 

Once this work was completed, the developer recognised that the property’s value had risen and wanted to see how they could leverage this to secure a better finance agreement. 

Why we were able to help

When you have a bridging loan, you essentially have to refinance if it's not financially viable to repay the loan within the short term. In this case, the client had recognised that repaying their existing bridge within the 12-month period under which it was issued would be restrictive to their future growth. 

Instead, they chose Rangewell to help them navigate the lender's market and find a better option. We worked with the client to explore the implications of their project plan, establishing that once completed, the finished care home would have far greater value and would only take 16 weeks to finish. 

With those facts in mind, we were able to secure a lender who offered a commercial mortgage on the projected value of the completed care home. As soon as the works were completed and the Change of Use was finalised, the refinance deal could be completed, and the client was able to switch to superior terms. 

Rather than having to repay their entire bridging loan within 12 months, the client was instead able to repay over a 10-year term at just 2.8% above base. 

Refinance your bridging loan with Rangewell

When it comes to bridging loan refinancing, you have limited options: either repay your existing bridging loan and consider a new finance application further down the line or refinance from your bridge to another product. 

Lenders need to see value in the project to take on this increased risk, so choose a team that can help you prepare your application and negotiate the right terms and rates to suit your needs. Rangewell offers just that — we're here to work with you and make the lender's market easy to navigate. 

We can help you better represent your project to lenders and get them on board, offering refinancing agreements that may not have been available to you as an individual. Just as you are an expert in your own business, we know how to leverage the lender's market to refinance in a way that works best for you. If you've taken out a bridging loan and want to refinance, get in touch today to get started.

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