Bridging finance can be an excellent short-term solution, but even the best-arranged loan can turn into a problem if the exit strategy is weak. For brokers, understanding how and when a client plans to repay their bridging loan is just as important as securing the funding itself. A poorly planned exit could bring about unwanted delays, penalty fees, or even default. In this guide, we’ll explore what brokers need to know about exit strategies, what can go wrong and what they can do to help clients avoid last-minute stress.
1. Why the exit strategy matters so much
Bridging loans are excellent when speed is needed but it’s important to note they are also only temporary. The lender needs to be satisfied in the knowledge that the borrower can repay in full within the agreed term. Without a clear route to pay back, known as exiting, the entire deal could be put at risk. As a broker, your job is to help your client show how they’ll settle the debt, whether it’s through a property sale, refinance, or another route. A solid exit plan reassures the lender and improves the borrower’s approval chances, and can bring about speedier completions.
2. The three most common exit routes
Most bridging loans are repaid in one of three ways:
- Property sale: The borrower sells a property that they named as security or another property in their portfolio. This is common for homeowners waiting for a sale to complete or investors flipping a property.
- Refinance: The borrower switches to a longer-term mortgage once the property has increased in value or meets standard criteria.
- Other capital sources: Sometimes borrowers repay through business income, inheritance, or private investment.
Be vigilant in your understanding of any risks and timelines. Brokers should always consult their client to make sure they are happy and able to make a payment within the proposed term and that this can be backed by real evidence such as listings, refinance agreements, or proof of funds.
3. Aligning loan terms with realistic timeframes
One of the more common issues tends to be with setting the bridging term too short. Clients often underestimate how long it takes to actually get a sale to completion, often by no fault on their part. A broker should challenge unrealistic expectations. Look at an average sale time in the locality – if this was averaged around the three months mark, yet the property needs refurbishment, a six-month loan length may not even be ample enough. Encourage clients to allow for delays in valuation, conveyancing, or survey stages. Lenders appreciate a realistic, well-structured timeline far more than optimistic promises. Remember, you do not have to keep the loan for that period, but it’s wise to have a safety net.
4. Exit readiness and documentation
Lenders want proof that the exit is fully attainable and is not just a hopeful guess. A good broker ensures all supporting evidence is ready before submission. For a sale exit, include an agent’s confirmation or listing link. Include an agreement in principle and emphasise the client’s credit standing when refinancing. The stronger the documentation, the faster the underwriting. Missing or weak evidence often causes last-minute problems as lenders chase details when time is running out.
5. Everything can change in the market
The property sector is notoriously volatile. A strong sales pipeline today could stall due to a demand drop or a sudden hike in borrowing charges. Brokers should stay aware of what is going on and make sure the clients are kept informed too. If the market is cooling, it may be safer to structure a longer term or ensure there is a refinance option if the sale does not complete in time. Proactive brokers look ahead rather than reacting when the deal is already under pressure.
6. The refinance exit: a closer look
Refinancing is one of the most popular exit strategies, but it can be difficult in practice. Borrowers often plan to move onto a buy-to-let or commercial mortgage after works are complete, but delays or low valuations can cause major setbacks. Always check the refinance lender’s criteria early. If the client has credit difficulties or struggles with an income history, flag it before submission. A small preparatory period can prevent serious stress later and help the lender underwrite with confidence.
7. Communication between lender, broker, and borrower
Clear and transparent strategy leads to a smooth exit. All parties should know the key milestones: valuations, legal process and when the sale or refinance dates should come in to play. Problems often arise when brokers assume clients are progressing their exit, only to find out they have fallen behind. A simple monthly check-in can avoid surprises. It’s also worth choosing lenders who will stay on top of it and are open to discussion if timelines need adjusting.
8. Planning for delays and contingencies
Even well-organised deals can have setbacks. A strong exit strategy includes a backup plan. If the sale falls through, can the borrower refinance quickly? If the refinance valuation comes in low, can they top it with savings or external funds? Lenders value having sound relationships and trust with borrowers and look more favourably at brokers who encourage clients to be this way. Having a Plan B reassures everyone involved and gives clients breathing space if things go off schedule.
9. The cost of getting it wrong
Missing an exit deadline can be expensive. Most lenders charge default interest or extension fees if repayment is late. In serious cases, they may begin recovery action to protect their funds. These outcomes damage the borrower’s credit record and may also negatively impact on the reputation of the broker too. Explaining these risks to clients at the outset can keep things in check, being better organised and reducing the chance of last-minute panic.
10. How brokers can help clients stay on track
Brokers have the main objective to act for their clients, to their benefit to bring about deals that are stress-free. Keep close checks on progress. Develop strong ties with your conveyancers, valuers, and refinance lenders so you can stay informed. Encourage clients to work with lenders who offer transparent extensions or flexible exit options. Your involvement should continue until repayment, as on-going support builds trust and can open doors quicker to fund future business.
Avoiding last-minute stress
Bridging finance should be a helpful short-term tool, not a cause of anxiety. The best results happen when brokers and lenders work together from day one, with a sound and sensible exit plan in place. By preparing clients thoroughly, helping them in anticipating delays and using better expectation, you can prevent last-minute stress – all of which will equate to a much more relaxed experience from start to finish for everyone.