The exit is underwritten before the loan completes
A bridging loan has no long term repayment structure. There is one repayment, at the end, and everything in the underwrite points at it. Lenders will ask for the exit in writing at application: if it is a sale, they want comparable evidence supporting the asking price and a realistic marketing period; if it is a refinance, many want a decision in principle from the remortgage lender before the bridge completes. A vague exit does not usually mean a decline, it means a lower loan to value and a higher rate, because the lender prices the risk of the loan running past term.
Exit one: refinance onto a term mortgage
The classic pattern is buy, refurbish, remortgage. The bridge funds a property that no mortgage lender would take in its current state, the works make it lettable, and a buy to let mortgage repays the bridge based on the improved value.
Take a worked example. An investor bridges £150,000 gross to buy and refurbish a property. After works it is valued at £240,000 and lets for £1,100 a month. A buy to let remortgage at 75% loan to value raises £240,000 x 0.75 = £180,000, which clears the £150,000 bridge and returns £30,000 towards the works spend, before fees.
| Item | Figure |
|---|---|
| Bridge to repay (gross) | £150,000 |
| End value after works | £240,000 |
| Remortgage at 75% LTV | £180,000 |
| Surplus released before fees | £30,000 |
The remortgage has to pass the new lender's rental stress test as well as the valuation. At a typical limited company interest coverage ratio of 125% and a 5.5% stress rate, a £180,000 loan needs rent of £180,000 x 0.055 x 1.25 / 12, which is about £1,031 a month, so £1,100 passes with little headroom. If the rent came in at £950, the loan would be capped below £180,000 and the shortfall would need cash. Two other traps are worth knowing: some remortgage lenders apply a six month rule, declining or restricting lending within six months of purchase, and down valuations against an optimistic end value are the most common reason a refinance exit falls short.
Exit two: sale
Sale exits are common on flips and on properties bridged simply to meet an auction deadline before selling on. The risk is time. A UK residential sale commonly takes four to six months from listing to completion, and a 12 month bridge leaves little slack if the property lists in month five. Lenders test sale exits against local comparables rather than the borrower's target price, and a closed bridge with a fixed repayment date suits an exchanged sale, while an open bridge within a maximum term fits a property still to be marketed.
What happens if the exit is late
Running past term usually means an extension fee, often around 1%, sometimes a fresh valuation, and on some products a default rate well above the original monthly rate. On a £150,000 bridge at 0.9% a month, every extra month is £1,350 before any penalty pricing. Lenders would generally rather extend a loan that is progressing than enforce, but the costs compound quickly, which is why the term is worth setting against a realistic exit date rather than a best case. The full cost stack, including what an overrun adds, is set out in our guide to what a bridging loan actually costs, and our bridging cost calculator shows what each additional month costs on any loan size.
What usually decides marginal cases
Strong exits share three features: they are evidenced, they are stress tested and they have a fallback. Evidenced means a decision in principle or comparable sales, not an estimate. Stress tested means the refinance still works if the end value comes in 10% light or the rent £100 a month lower. The fallback matters because the two exits are not mutually exclusive: a property that can be refinanced can usually also be sold, and lenders take comfort from a case that works both ways. For projects involving heavier works, the boundary between a refurbishment bridge and development finance also affects the exit, since a part-complete project is difficult to refinance and difficult to sell.
Related questions
What does a lender accept as evidence of an exit?
For a refinance, a decision in principle from the remortgage lender is the standard evidence, supported by rent figures that pass the stress test. For a sale, lenders look at comparable sold prices and the state of the local market rather than the borrower's own valuation. Stronger evidence generally means a better rate.
What is the difference between an open and a closed bridge?
A closed bridge has a defined repayment event on a known date, for example an exchanged sale awaiting completion. An open bridge has a maximum term but no fixed exit date. Closed bridges are lower risk to the lender and usually price slightly better, but most investment bridges are open.
Can I remortgage within six months of buying the property?
Some lenders apply a six month rule and will not lend, or will lend only against the purchase price rather than the improved value, within six months of purchase. A workable minority lend on the new value sooner where the works are evidenced. This is often the detail that sets the bridge term.
What if the property is worth less than expected after the works?
The remortgage is capped by the lower valuation, and the difference between the bridge balance and the new loan has to come from cash. On a £150,000 bridge, an end value of £210,000 instead of £240,000 cuts a 75% remortgage from £180,000 to £157,500 and removes most of the surplus. This is the most common way refinance exits fall short.
What happens if I simply cannot repay at the end of the term?
In practice lenders extend loans that are progressing, at a cost: an extension fee, possibly a new valuation and often a higher rate. If the loan is not progressing, the lender can appoint receivers and sell the property as mortgagee. That outcome is rare and slow, but it is the backdrop to every exit conversation.
Talk it through with us
Every case is different. Call us, message us on WhatsApp, or send us the basics and one of our team will come back to you about bridging finance, usually the same working day.