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Last updated on April 11th, 2025 at 12:50 pm
A rebridge or rebridging of a bridging loan is when a borrower refinances their existing bridging loan with a completely new loan on the same property, whereby the duration of the loan is extended and the terms are more favourable to their current situation.
For any developers or investors that are in the middle of a large refurbishment or are awaiting a sale of their property to repay their bridging loan, the use of a rebridge allows them to get a completely new loan and extend their repayment terms before a sale takes place or more funding becomes available.
With a bridging loan usually having a maximum duration of 18-24 months, the loan may be at risk of default unless additional funding is arranged.
Whilst a rebridge of a bridging loan is common, typically the terms of a rebridge are less favourable, because the borrower has not met their original bridging loan repayment on time. Hence, the interest rates for a rebridge may be higher than the initial loan and the borrower may not be approved by their existing lender and have to seek an alternate provider.
To rebridge a bridging loan, you can apply directly with a lender or bridging loans broker. KP Finance offers expert advice and quick decisions on everything relating to bridging. Speak to one of our team members on 0203 488 1128 or email us at enquiries@kpfinance.co.uk
Rebridge a Bridging Loan Repayment Example:
Original bridging loan:
Loan amount: £1 million
LTV: 70%
Term: 12 months
Interest rate: 0.85%
Monthly interest: £8,500
12 month interest: £102,000
Full repayment amount: £1,102,000
Rebridge:
Loan amount: £1 million
LTV: 75%
Term: 12 months
Interest rate: 1.0%
Monthly interest: £10,000
12 month interest: £120,000
Full repayment amount: £1,120,000
What Scenarios Would You Need To Rebridge a Bridging Loan?
Awaiting sale of the property – Developers and investors will use bridging finance and carry out renovation work to maximise the value of the residential or commercial property. When the project is complete, it might be sold on the open market for the best price and once sold, the bridging loan will be repaid in full.
Although the end of the loan term may be approaching, the borrower might not have received an offer for the property yet, is awaiting the best offer possible or the sale is taking several months due to mortgage delays and chains. In which case, a rebridge to extend the loan might be a sensible option.
Project is overrunning – If you have used a bridging loan to purchase a property, are carrying out refurbishment work and this is running longer than expected, you may not be able to repay your original bridging loan on time and need to rebridge.
Depending on the status of the project, it is common for building work to run longer than expected, especially if any issues arise with builders, contractors, asbestos, subsidence, flooding and fires – you may need longer than the allocated 18 or 24 months to complete the required work.
Get access to more capital – If the borrower needs more capital toward to finance their building or construction, a rebridge may allow them to borrow an additional 10% or 20% if their current LTV is 50% or 60%, since the lender is willing to go to a maximum of 70% or 75% LTV.
Some bridging lenders are able to offer 80% or 85% LTV in certain scenarios as the maximum LTV value, but this will be reflected in higher interest rates and possibly giving up some equity in the overall project.
Avoid arrears and repossession – If you are approaching the end of your existing bridging loan and do not have a sale or option to pay it back in full, the loan will be put into arrears. This will incur late fees, default charges and interest will continue to accrue on the loan. Being in arrears may also negatively impact the borrower’s credit score.
Rebridging a bridging loan may allow the borrower to extend their loan for a further 12 or 24 months and avoid default and possible repossession of the property if the loan is in arrears for long enough.
Awaiting more long-term finance: Developers may be waiting for longer-term finance to come through a mortgage, sale or outside investment, and this might be delayed. If they are waiting specifically for another financial arrangement to complete, they may look to rebridge for a further 6 months or longer.
Awaiting a buy-to-let mortgage – For developers that have upgraded a property for the purpose of renting it out to tenants, they might be awaiting approval and confirmation of a buy-to-let mortgage.
When is a Rebridge of a Bridging Loan Not a Good Idea?
There are certain scenarios when rebridging a bridging loan is not sensible for both the borrower and the lender, including:
No clear exit strategy – Some bridging loans are classed as ‘open’ with no clear exit strategy, but for many lenders this is the method of how the loan will be paid back. If the borrower is unsure what to do with their bridging loan or property and has no clear vision or repayment strategy, they should possibly seek alternate arrangements rather than committing to another bridging loan which incurs charges and risk of repossession if not repaid.
Financial troubles – If the borrower is suffering financial trouble and has lost significant income from carrying out construction work or a loss of investment, using a bridging loan which ties them down to higher rates may not be recommended. It might be more sensible to sell the property and recover any losses or speak to a professional for financial advice.
Property value has decreased – If the project has experienced unexpected issues and is in worse condition, it might be better for the borrower to sell the property rather than trying to rescue it. Lack of planning permission, fires, floods or squatters can make keeping a property more troublesome and taking out a new bridging loan may not be sensible.
Will Bridging Loan Terms Be More Expensive When You Rebridge?
Yes, a rebridge often comes with higher interest rates. This is because the lender classes this as riskier because the borrower has not completed and repaid their original loan. For this reason, the original lender may not want to take on the loan again and borrowers will have to apply for funding with alternative providers.
Other factors will contribute to the rate you are charged including:
- The current loan-to-value (LTV)
- Business plans and forecasts
- Condition of the property
- Timeframe and exit strategy
- Reason for needing to rebridge
Importantly, borrowers will also be subject to other additional fees that come with taking out a bridging loan such as survey and valuation fees, solicitor fees, lender arrangement and broker fees, if applicable.
Can I Ask My Existing Bridging Lender For an Extension?
Yes, you can ask your current bridging lender to give you an extension for 3 or 6 months, or longer. If you have a valid reason for extending and can back this up with clear financials, business plan and exit strategy, it is something that they may be willing to consider. Note that you may still be subject to extension fees, admin fees and be moved to a higher interest rate.
