Should You Rebridge To A New Bridging Loan Or Refinance Another Way
When you first took out your bridging loan, you probably had a clear plan. You expected to sell, refinance, or complete works within a set timeframe.
Then life happened. A sale fell through, builders ran late, planning dragged on, or the mortgage you expected did not materialise.
Now the end of your bridging loan term is in sight, and you still need more time. This is where re-bridging to a new bridging loan can potentially step in.
Re-bridging simply means taking a new bridging loan to repay your existing one. Done well, it can give you breathing space, protect your exit strategy, and in some cases even improve your terms. Done badly, it can become even more expensive, so professional advice should always be taken.
What Does Re-bridging To A New Bridging Loan Mean
Re-bridging is the process of replacing your current bridging loan with another short term facility. The funds from the new loan repay the old one in full. You then continue with a fresh term and a new exit plan.
In practice, this can help you to:
- Extend the time you have to sell or refinance
- Avoid default fees and legal action from your current lender
- Raise extra funds if your project has gone over budget
- Restructure borrowing if your circumstances have changed
It is similar to applying for your original bridging loan. You still need a strong exit strategy, you still secure the loan against property, and you still pay higher interest than a standard mortgage.
The difference is that your track record on the current project now plays a part in how lenders view you.
When Might You Need To Rebridge Your Bridging Loan
There are many reasons why you might consider re-bridging to a new bridging loan. Some are minor delays, others are more serious.
Project delays and overruns
Property projects rarely run exactly to schedule. You might face:
- Builders running behind
- Extra work discovered once renovations begin
- Slow planning or building control sign off
If the property is not yet suitable for a standard mortgage, you may not be able to refinance as planned. Re-bridging can buy you more time to finish works and then secure longer term finance.
Slow or collapsed property sales
If your exit relied on a sale, the market may not have moved as quickly as you hoped. Perhaps your buyer pulled out at the last moment. Maybe offers are lower than expected and you do not want to accept a heavy discount.
Re-bridging can give you space to hold out for a better price rather than accept a distressed sale simply to clear your current bridge.
Extra funds needed to complete the project
Sometimes the budget just does not stretch far enough. Material costs rise, labour increases, or structural issues appear mid project.
A new bridging loan can in some cases repay the old facility and release additional capital to finish the work. Lenders will want to see that the extra borrowing genuinely puts you in a stronger position and leads to a realistic exit.
Find out Your Options
How Re-bridging To A New Bridging Loan Works
Although every case is different, the basic steps usually look like this.
Step one: Understand your current position
You start by gathering the facts. That means:
- The outstanding balance on your current bridge
- Any default interest or penalties that may apply
- The current value of the property or properties involved
- How much extra time you realistically need
Step two: Agree your new exit strategy
Lenders care most about how the new bridging loan will be repaid. You need a clear, realistic, and preferably improved exit plan. This could be:
- Sale once works are complete
- Remortgage to a standard residential or investment mortgage
- A different exit route if your original plan is no longer viable
You need to be confident that you will not end up in the same position again when the new term ends.
Step three: Find a suitable re-bridging lender
Not every lender likes re-bridging. Some see it as a sign that something has gone wrong and do not wish to take on the risk. Others specialise in this type of case and take a more flexible view.
Step four: Application, valuation, and offer
You then move through the usual bridging process. Lenders will typically want:
- Personal and financial details. We would collect these by way of a fact find.
- Details of the property or portfolio you are securing
- Evidence of works completed so far, if relevant
- A clear explanation of why the original exit did not happen
- A detailed new exit plan and timescales
They may arrange a fresh valuation, especially if you have added value through refurbishment. If the property value has increased, this can sometimes help improve the terms or loan to value.
Once satisfied, the lender issues an offer. Your solicitor completes the legal work, the new bridge completes, and your previous loan is repaid.
Key Risks And Costs Of Re-bridging To A New Bridging Loan
Re-bridging can be useful, but it is not always the best answer. You need to understand the risks and costs before you commit.
Fees and interest
With a new bridging loan you usually face:
- Arrangement or facility fees
- Valuation costs
- Legal fees
- Broker fees for arranging the finance
On top of that you still pay bridging interest, often at a higher rate than standard mortgages. The total cost might still be worthwhile if it avoids heavy default charges or a fire sale, but you need to be clear of the full picture, and professional advice is always recommended.
The danger of no real exit strategy
If nothing important changes, you risk facing the same problem again at the end of the new term. That is why lenders and brokers focus so much on your revised exit strategy.
You should only rebridge if you have a credible plan that you genuinely believe in. For example, a nearly complete refurbishment with strong local demand for the finished product is very different from a stalled development with no clear way forward.
Credit profile and reputation
If your current bridge is in arrears or default, some lenders may be cautious. That does not mean you have no options, but pricing and loan to value might be affected.
This would also affect a standard refinance at the end, if that is the plan, so you need to explore this.
Alternatives To Re-bridging A Bridging Loan
Re-bridging is not the only route. Depending on your situation, other options may suit you better. An example of these could be:
Extension with your existing lender
Some bridging lenders will agree a term extension. This can sound simple, but sometimes comes with higher interest or extra fees. You might only gain a short extension, which does not really solve the problem.
A broker can help you review any extension offer from your current lender and compare it with re-bridging to a new bridging loan or other exits.
Refinancing to a standard mortgage
If the property is now mortgage ready, moving to a standard residential or investment mortgage could reduce your costs and give you more stability.
The process usually takes longer than a bridging application, so you may still need a short term solution if your current bridge ends soon. A broker would need to understand the full picture to determine if you qualify for a regular mortgage, or bridging finance is still required.
Selling the property
Sometimes the simplest answer is still to sell, even if that means accepting a realistic offer rather than holding out for the very highest price.
Re-bridging may still be useful if you need a little more time to complete works or market the property properly, but you should always balance the possible extra sale price against the extra cost of further short term borrowing.
Conclusion
Re-bridging to a new bridging loan can be a potential solution when your original plan has hit delays or changed direction. It can give you more time, protect your exit strategy, and in some cases even improve your position.
It is not always the right answer, though. You must weigh the costs, understand the risks, and be honest about your new exit plan. The decision should fit your wider financial goals, not just short term.
If your bridging loan term is approaching and you are unsure what to do next, contact Kerr & Watson today to talk through your circumstances.
