How Do I Get Out of a Bridging Loan?
Bridging loans can be a powerful tool for quick financing, but when the repayment deadline looms and no clear exit is in place, borrowers can find themselves under immense pressure. At Bridging Loans Lawyers, we understand the urgency and complexity of navigating bridging finance, and in this comprehensive guide, we’ll explore how to get out of a bridging loan effectively, legally, and with your financial health intact.
Understanding the risks of bridging loans
Bridging loans are short-term finance solutions, typically lasting from 3 to 24 months, designed to “bridge” the gap between the purchase of a new property and the sale of an existing one or the arrangement of long-term financing. They come with high-interest rates, exit fees, valuation charges, and strict repayment terms.
Failure to exit on time can lead to:
Skyrocketing interest through rolled-up payments.
Enforcement action including repossession.
Damaged credit score and legal costs.
Thus, understanding your exit strategy is essential the moment you take out the loan.
Top exit strategies for bridging loans
1. Sale of Property
The most common method to repay a bridging loan is through the sale of the property being financed or another asset. This is known as a “closed bridging loan” where there’s a clear, agreed-upon sale date.
Key Considerations:
Ensure the property is actively marketed.
Be realistic about pricing and market conditions.
Work with solicitors to expedite the conveyancing process.
If the sale is delayed or falls through, consider immediate contingency options.
2. Refinance with a long-term mortgage
Another popular exit strategy is to remortgage the property onto a standard residential or buy-to-let mortgage.
Steps to Take:
Check your loan-to-value (LTV) ratio—typically lenders require below 75%.
Ensure your credit file is clean and up-to-date.
Demonstrate rental income or personal income affordability.
Engage with a mortgage broker who understands bridging finance transitions.
Tip: If your bridging loan was for refurbishment, ensure the works are completed to increase property value and pass lender surveys.
3. Securing a development finance loan
If the bridging loan funded property development and you require more time or capital, development finance might be suitable.
Advantages:
Tailored for construction phases.
Structured interest repayment.
Longer terms (up to 36 months in some cases).
Ensure your business plan and schedule of works are solid, with accurate costings and contingency funds.
4. Sale of other assets
If you have multiple assets—cars, secondary properties, businesses—you might consider liquidating them to repay the loan.
Things to Consider:
Will the asset sale cover the full balance?
Is it a fast-moving asset (e.g., shares) or one that might be harder to liquidate?
Will the sale impact your long-term financial stability?
5. Bridging loan to bridging loan
Although not ideal, some borrowers may refinance their existing bridging loan with another bridging loan. This is only recommended as a last resort.
Risks:
Higher interest rates and fees.
Shorter loan terms.
Increased scrutiny from lenders.
Only do this if you have a firm exit strategy for the new loan in place.
6. Personal loan or equity release
If you’re eligible, a personal loan or equity release from an unencumbered property might provide a way out.
Advantages:
Potentially lower interest rates.
Can be arranged quickly in some cases.
Risks:
Personal loans usually have lower borrowing limits.
Equity release reduces future inheritance and may involve fees and strict conditions.
Negotiating with the bridging lender
If you’re approaching your bridging loan term with no clear exit, early communication with your lender is crucial.
What You Can Request:
Extension of term (may incur fees or higher rates).
Interest-only arrangements for a short period.
Conversion to longer-term financing within the same lending institution.
Most lenders prefer collaboration over confrontation, especially if they believe repayment is still viable.
Legal support: Bridging Loan Solicitors
Specialist solicitors can help you:
Renegotiate terms with your lender.
Avoid repossession proceedings.
Handle remortgaging transactions swiftly.
Protect your legal and financial position.
At Bridging Loan Lawyers, we routinely handle high-pressure bridging loan exits, helping clients avoid default, repossession, and financial stress.
Consequences of not repaying a bridging loan
Failure to repay can result in:
Legal action from the lender.
A forced sale or repossession of your property.
Court judgments affecting your credit rating.
Personal liability if the loan was not limited to the property.
That’s why having a solid exit plan from the outset is paramount, and seeking legal and financial advice early can make all the difference.
How to plan a safe exit from day one
Even before taking out a bridging loan, it’s important to:
Have multiple exit strategies mapped out.
Be aware of all loan terms, including interest rates, fees, and default clauses.
Avoid overestimating future property values or sale timelines.
Choose lenders with transparent policies and fair exit clauses.
Work with legal experts who can review the loan agreement and flag risks.
Don’t delay your bridging loan exit
Getting out of a bridging loan is all about planning, speed, and strategy. Whether your exit involves selling property, refinancing, or negotiating with the lender, acting early is critical.
If you’re feeling the pressure of an impending repayment deadline, our bridging loan specialists at Bridging Loans Lawyers are here to help you make informed decisions and protect your assets.