Can You Refinance An Existing Bridging Loan?
Bridging loan complications are typically assessed on the basis of two primary factors:
- Sufficient security to cover the total costs of the loan
- A provable exit strategy to ensure prompt repayment
In the case of the latter, it has not always proved easy for applicants to provide formal evidence of an exit strategy. They may have complete confidence in their ability to repay the loan on time, but for any given reason cannot provide the required evidence.
This has been a major obstacle for many prospective borrowers; some specialist lenders are providing eligible applicants with the option of taking out a bridging loan on an ‘open’ basis without an exit strategy.
In such instances, proof of an exit strategy is not strictly necessary, and nor is there a formally agreed repayment date. On the basis of the borrower’s credentials, business acumen and background, the lender considers the transaction low-risk and issues the loan.
But what if at some point during the subsequent months the borrower decides they do not have enough money to complete the project as planned? What if it becomes necessary to increase the loan amount, or extend the planned repayment period?
Increasing or Extending a Bridging Loan
Whether or not it is possible to refinance an existing bridging loan will be determined on the basis of several factors. Though for the most part, it is entirely down to the lender to decide if such a facility is available.
When taking out a bridging loan, the flexibility of the loan will be made clear in the terms and conditions. Your bridging loan broker will help you negotiate the best possible deal to suit your requirements, explaining if and to what extent there is room for change, should it become necessary.
Re-financing an existing bridging loan typically means taking out a new loan, used to repay the initial loan and raise the additional funds required. This is something that may be offered by the loan’s original provider, or can be sought from a new lender.
It may also be possible to increase the size of the existing bridging loan and/or agree a new repayment date, depending on the policies of the lender in question and the specifics of the scenario.
Talk to Your Lender or Broker
If you run into any difficulties with a project funded by a bridging loan, it is essential to talk to your lender or broker at the earliest possible stage. Contrary to popular belief, lenders do not want to repossess borrowers’ assets and sell them to recoup their losses.
This is always a last-resort, worst-case scenario option that benefits nobody.
Consequently, the vast majority of lenders will be willing to discuss a wide variety of options to help clients facing difficulties. If this means increasing the size of the loan, delaying repayment of the loan or both, it will often be offered as an option.
Just as long as you do not leave things until the last moment, the help you need to keep your project on track and repay your loan could be just a quick call away from a broker such as UK Bridging Loans.