Before you apply for a bridging loan, it’s important to have a clear and reliable exit strategy in place. Without one, you will not be able to secure the funds needed, as all bridging lenders require a valid exit. It is in both your interest and theirs.
Whilst some exit strategies are more common than others, there are several ways that funds can be raised to repay a bridging loan.
This is one of the most common methods used to exit a bridge loan. As long as there is enough remaining equity to repay the gross loan plus any required buffer, you can use any property you own to clear the debt.
Remortgaging is another common method of refinancing for a bridge loan exit. This can involve:
If this is the exit strategy you want to use for your loan, the Willows team can help you find the most suitable deal for your finances.
Everyone’s situation is unique and requires a specific solution. For example, if you’re self-employed and have only been trading for 9 months, you may not have enough history to qualify for a traditional mortgage.
As a broker, we have the flexibility to source lenders that accept applicants with one year’s trading history. In this scenario, we would likely request bank statements to verify your income over the previous 9-month period.
Sometimes we advise that a bridging loan is not a suitable option based on the financial information supplied. There could, however, be alternatives available that our team could recommend.
Much like refinancing with a mortgage, taking out a secured loan could also be used as an exit strategy.
With a secured loan, the property is used as security and you repay the debt over a fixed period, including interest.
The process will involve checks for:
If you have an adverse credit history this can limit the number of deals you have access to, although there may still be a suitable deal that fits into your financial setup.
A Grant of Probate confirms the executor of a will and their legal right to manage someone’s property, possessions and money in the event of their death.
If you have received money through an inheritance, some lenders may accept this as a valid exit strategy for a bridge loan.
They will usually ask you to provide proof of the funds available in the estate to ensure it can cover the full loan costs and any associated tax liabilities.
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This is an option more relevant for individuals that are approaching retirement. If you are of an age that allows you to withdraw a lump sum from a pension pot and it is of enough value to cover the full cost of the bridge loan, most lenders will accept this.
Before you commit to this method, it is important to be aware of any tax liabilities that could be triggered by using pension funds and if there are any potential fees from your provider.
Speak with your pension provider about your tax liabilities and our team are also on hand to help you find a deal that works for you.
Depending on the lender you use, you may have the option to re-bridge. This involves the process of replacing your current bridging loan with a new one.
When you initially took out the bridging loan you would have provided an exit strategy that satisfied the lender’s requirements. When you ask to re-bridge, they will likely want you to explain why you were not able to carry out your plan.
For example, if a building project was delayed due to adverse weather conditions, which caused the project to overrun, this may be accepted as a valid reason.
At Willows, we can help you arrange a one-time re-bridge, provided there is a credible exit strategy in place. However, if a loan has already been re-bridged once, we may have to discuss alternative solutions.
You don’t necessarily have to sell an asset to raise funds or commit yourself to another loan as part of an exit strategy.
If you are in a position to use funds from your savings to repay the loan, most lenders would accept this method.
They would ask you to provide proof that you have a large enough savings pot to cover the gross loan amount. However, the lender may ask why you are choosing to borrow rather than use your savings upfront if this is your planned exit, so it’s a good idea to have an explanation ready.
This is something we can discuss when you get in touch about a bridging loan, and our team will go through your options to help you find something that’s suitable.
This will work in a similar way to using your savings to pay off the bridge loan. The lender will ask you to provide proof of shareholdings that exceed the value of the gross loan – supporting evidence may also be required.
Using your shares in this way may require you to pay certain tax liabilities – this is something you should check with the entity in charge of your share holdings.
Bridging loan exit strategies can be made using a variety of funding sources and proceeds taken from the sale of a business is another option.
The lender will ask for evidence of an agreed sale, which can include things like:
Some lenders may require you to have an alternative strategy in place, as business sales can be subject to unexpected delays or collapses.
If you are in possession of assets or other investments that could be sold to raise the funds to repay a bridging loan, some lenders may accept this method.
For example, this could be items such as:
It can sometimes be more difficult for a lender to accept this method compared to traditional funding routes, so this would be agreed purely at their discretion.
Establishing a bridge loan exit strategy should be one of the first things you consider before you start to look for deals.
Selling a property, refinancing or using inheritance or pension pots are just some of the methods accepted by lenders.
If you’re not sure where to start, the Willows team can give you some helpful advice about the most suitable strategy to use based on your circumstances.
We’ll also help you find the best bridging loan deal and ensure you approach the whole process with confidence.
Call us on 01656 766 158 to see what we can do for you.
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Willows Finance Limited
Brocastle, Bridgend, CF35 5AS
Authorised and regulated by the Financial Conduct Authority
Firm Reference Number: 670052
Company Number: 6678545 (Registered in England and Wales)
This document outlines the services we provide. If you need clarification, please contact us at 01656 766158.
We offer first and second charge regulated mortgage contracts for business or personal use.
Other finance options may include:
Regulatory Status:
We offer an advised mortgage broking service and provide enough information for you to make an informed decision.
We are not independent financial advisers. Free debt advice is available from the Money Advice Service.
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Lenders may also have their own privacy policies which will be provided to you.
We charge a broker fee upon loan completion. The average fee is approximately 5%, depending on your situation.
Fee details:
No refund is offered after completion. You may pay upfront or add the fee to your mortgage. Fees and commission will be detailed in your ESIS and Mortgage Agreement.
You will receive a Mortgage Agreement and an ESIS document detailing:
You may cancel your application anytime before completion without any charge. Mortgages cannot be cancelled after completion.
Missing payments can lead to charges, repossession, and negative impacts on your credit rating.
Consolidating debt may result in higher long-term interest. Securing debt against your home increases risk.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loan secured on it.
If you wish to complain, contact us at:
Willows Finance Limited
Brocastle, Bridgend, CF35 5AS
Tel: 01656 766158
You may be able to refer your complaint to the Financial Ombudsman Service.
We are covered by the FSCS. You may be eligible for compensation of up to £85,000 per person per firm for mortgage advice and arranging.
More info: www.fscs.org.uk
After processing your application, you’ll receive a Mortgage Agreement and have a 7-day reflection period.
Contact us during this period with any questions. To proceed, sign and return the agreement.
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