Refinance & Exit Finance
A maturing bridge or development loan approaching default is a financial emergency. Act early ” refinance options are far greater when the loan is still performing.
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What is Refinance & Exit Finance?
A refinance or exit loan is a new short-term facility used to repay an existing bridging or development loan that cannot be repaid within its original term. When a borrower's planned exit ” sale or refinance ” is delayed, the existing loan approaches its maturity date. Without action, the loan enters default, triggering penalty rates and potential enforcement. A well-timed refinance buys the time needed to complete the exit at a far lower cost than default.
- Repays a maturing bridging or development loan
- Prevents default, penalty rates and enforcement action
- Buys time for a delayed sale or refinance to complete
- Can consolidate multiple maturing facilities
- Adverse credit and distressed situations considered
How Does Refinance & Exit Finance Work?
Identify the Maturity Date
The existing loan's maturity date ” and the lender's tolerance period before formal default ” must be established immediately. Many lenders have a 1“3 month grace period; others trigger default on the day.
Assess the Security
The refinancing lender values the security property. If the property has increased in value or works are complete, a higher LTV may be available.
Exit Strategy Confirmed
The new lender requires a credible exit ” sale completion date, refinance application in progress or new exit route. The exit must be achievable within the new loan term.
Redemption and New Loan
The new bridge redeems the existing loan in full, including all interest, fees and any early repayment charges. The new term begins.
How is Refinance & Exit Finance Secured?
The refinance loan is secured by the same property as the existing facility ” a first charge is registered as the existing charge is redeemed. If additional security is available, it can be offered to support a higher advance or better terms.
Exit Strategy
All lenders require a credible exit strategy before funds are released. Common exit routes include:
- Sale of the security property ” proceeds repay the new bridge
- Refinance to a term mortgage once the reason for delay is resolved
- Completion of a delayed development and sale of units
- Capital injection from shareholders, investors or joint venture partner
Is Refinance & Exit Finance a Good Idea?
Advantages
- Averts default penalties, which are typically double the contracted rate
- Preserves the ability to exit in an orderly way at a better price
- Prevents enforcement action and repossession
- Buys time without sacrificing the asset
Considerations
- A second loan adds costs ” arrangement fee and interest on the refinance
- New lender will scrutinise the reason for the delay and exit viability carefully
- Leaving it too late ” once in default ” significantly narrows options
- The new lender's terms may be less favourable than the original facility
How to Secure Refinance & Exit Finance
Act Immediately
The earlier you approach us, the more options are available. A loan still performing (pre-default) has a far broader market than a defaulted loan.
Explain the Delay
Be clear about why the original exit has not completed ” sale chain issues, delayed planning, mortgage hold-up. Lenders need to understand the reason and assess whether the new exit is credible.
Confirm the New Exit
Provide evidence of the revised exit ” a buyer in solicitors, a mortgage application in progress, a sale agreed. This is the primary factor in the refinancing lender's decision.
Submit Urgently
Time is critical. Submit your enquiry immediately with the maturity date, outstanding balance, security details and new exit plan.
How Much Can I Borrow?
The refinance loan must cover the outstanding balance of the existing facility including accrued interest, fees and any ERC.
- Must cover: outstanding principal + accrued interest + ERC + new lender fees
- LTV based on current property value
- Residential security: up to 70“75% LTV
- Commercial security: up to 65% LTV
- Additional capital (above the redemption figure) can sometimes be raised if equity permits
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How Quickly Can I Get a Loan?
Urgency is paramount. Simple residential refinances can complete in 5“10 working days with a desktop valuation. Physical valuations add 3“5 days. If the existing lender is already threatening enforcement, inform us immediately ” some lenders can complete in 48“72 hours for the right case.
Eligibility Criteria & How to Apply
- Existing bridging or development loan approaching or past maturity
- Property security available ” ideally the same as the existing loan
- Credible new exit strategy within the refinance term
- Adverse credit considered ” particularly if it arose from the distress situation
- Minimum loan (must cover existing balance): typically £50,000+
- UK-based borrower, company or LLP
9 Example Uses of Refinance & Exit Finance
Delayed Sale
A buyer pulled out at exchange, leaving the bridge about to mature with no sale completed. A refinance bridge provides 6 months to find a new buyer.
Planning Delay
A development bridge is maturing but planning conditions have delayed construction start. Exit finance buys 9 months for conditions to be discharged.
Development Overrun
A development project has run 4 months over programme. Exit finance repays the development loan while construction is completed and units are sold.
Mortgage Fall Through
The BTL mortgage arranged to exit a bridge fell through due to a surveyor down-valuation. A refinance bridge buys time for a new mortgage application.
Probate Delay
A property in an estate cannot be sold until probate is granted. Exit finance redeems the bridge while legal processes complete.
Chain Break
A property sale was in a chain that has collapsed. A refinance bridge repays the maturing facility while the property is remarketed.
Defaulted Loan
A borrower is already in default. A specialist lender willing to work with defaulted facilities provides a refinance at a higher rate, preventing enforcement.
Portfolio Consolidation
Three separate maturing bridges across a property portfolio are consolidated into one facility with a single lender.
Adverse Credit After Default
Missing payments on a bridge has generated adverse credit. A specialist exit finance lender assesses the case on security and revised exit only.
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