When property plans stall, re-bridging steps in

A regulated re-bridge has become a vital option in a broker’s toolkit, giving their clients choice and flexibility when plans change, often due to circumstances out of their control.

At a time when the property market can be unpredictable, giving a borrower a re-bridge — a fresh bridging loan when the original deal has ended — can allow time to get plans back on track.

It used to be that re-bridging loans were frowned upon, the suggestion that the borrower’s original plans had gone awry and they were now in desperate need of stock-gap funding. As a result there were limited options in the market and rates could be a lot higher, even if the fundamentals of the case remained strong.

When it comes to considering a re-bridge the details of the case need to be robust —there must be a good story. Usually this means looking at the original bridging application and assessing the situation, the funding need and the exit plan, as well as understanding what has changed to cause the client to want to re-finance.

Currently the vagaries of the property market are the biggest cause of hiccups, usually when a prospective buyer has pulled out of a purchase, either of the property that is being funded by the bridging loan, or of the property that the bridging customer is selling in order to free up the funds they need to exit the bridge and move to longer-term financing for the property they are buying.

Sometimes the issue is further down the chain and has a knock-on effect to the bridging. The clock is running down quickly on their original loan, so they need to re-bridge. It may not be as bad as a buyer pulling out, it could just be the ricochet effect of delays causing the whole process to slow down.

Similarly, the exit plan and long-term finance may well be progressing nicely but will take longer than the term of the original bridging facility to finalise, so being able to give a borrower another six or even 12 months of financing to achieve the exit will take the pressure off them.

Other challenges that bridging borrower’s regularly face are hold-ups to any work being carried out on the property that the original loan was secured against. This could be as complex as a delay in receiving planning permission, which in turn delays building work, or it could simply be that the refurbishment work is taking longer than anticipated, perhaps due to issues with the property, delays with contractor, supplies or even the weather.

Other re-bridge cases I’ve been looking at recently involve more personal circumstances, such as issues with probate or estate administration, where matters have not been dealt with during the original term as expected. It could also be that the borrower’s plans have changed and they now want to sell, rather than remortgage. A re-bridge could give the client time to work on a new strategy.

Whatever the situation, the re-bridging lender does have to review the case and assess the application from scratch, so the sooner the brokers engage the lender the better.

The re-bridge provider will have to consider: was the original exit credible, does the security remain strong and does the borrower have a clear exit plan? If the answer is yes to all those factors, and the delay was something unforeseen and unavoidable but ultimately can be resolved, then offering an additional term could make sense.

However, if the original exit plan was weak, or the circumstances have changed so significantly that there is a question mark over how the loan will be repaid, giving the borrower more time by granting a re-bridge is unlikely to solve the problem.

The key here is that, while a re-bridge is not necessarily more complex than the original bridging loan, it probably does require more attention than many mainstream lenders can provide. A re-bridge request should not be dismissed out of hand, but it does need careful consideration, something usually only possible from an experienced underwriter, not an automated tick box approach.

What the market currently needs from bridging lenders is more flexibility, understanding and a pragmatic approach to finding a solution to problems that customers are encountering, giving brokers a wider choice of common-sense options to help their clients.