Replacing existing property finance with something that works better
Property refinance covers the process of replacing existing property finance with new arrangements. The reasons for refinancing vary: reducing the rate, releasing equity, extending the term, moving from a short-term bridging facility onto a longer-term commercial mortgage, or simply moving to a lender whose criteria are a better fit for the current position.
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As with all refinancing, the decision needs to be based on the full picture, not just the headline rate of the new arrangement. Early repayment charges on existing facilities, arrangement fees on the new one, and the total cost over the remaining term all need to be understood before proceeding.
Common reasons for refinancing
An existing commercial mortgage or buy-to-let mortgage is coming to the end of its initial term and a better rate is available
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The property has increased in value and refinancing would allow equity to be released for further investment or another purpose
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A short-term bridging facility needs to be replaced with a longer-term arrangement now that the property is complete, tenanted or mortgageable
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The current lender's terms have become uncompetitive and moving to a different lender would reduce costs
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The borrower's financial position has improved since the original finance was arranged and better terms should now be available
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The borrowing structure needs to change, for example moving from personal to limited company ownership
What to check before refinancing
Before committing to refinance, there are several things worth understanding clearly.
Before committing to refinance, there are several things worth understanding clearly.
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Early repayment charges on the existing arrangement: these can be significant and may outweigh the benefit of moving
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Arrangement and valuation fees on the new facility: these need to be factored into the total cost calculation
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The break-even point: how long it takes for the saving to cover the cost of switching
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Whether the property needs to be revalued and what the current valuation is likely to be
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Whether the lender's criteria have changed or the borrower's position has changed since the original arrangement
We look at the numbers carefully before recommending a refinance. The goal is a genuinely better outcome, not just a change