Common reasons to refinance
Reasons usually fall into a handful of patterns.
- An existing term or fixed period is ending
- A bridge needs replacing with long-term borrowing
- Capital is needed for the business or another purchase
- Leases or trading have improved since the original loan
- Relationship or terms with the current lender no longer suit
Fresh valuation, fresh assessment
A new lender will instruct its own valuation, which may be lower than you expect. It will also reassess the leases, tenant and your finances as they are now. Arrears, new debts or a tenant leaving can all affect the outcome.
Raising capital
Releasing equity increases debt secured on the property and the cost of servicing it. Lenders will ask what the money is for. Funding business growth, a deposit elsewhere or tax bills each tells a different story about risk.
Hypothetical example, not a real client: a logistics firm that bought its depot years ago wants to refinance to fund new vehicles. A lender would consider the current depot value, the firm's trading and whether extra borrowing remains affordable.
Costs of switching
Early repayment charges, exit fees, valuation, legal costs and arrangement fees can outweigh savings. Compare the total cost of moving against staying, and check your existing terms before applying elsewhere.
Timing a refinance well
Starting early gives you choices. Collect up-to-date accounts, tenancy information and a redemption figure well before an existing term or bridge expires, so a lender can value and assess without a deadline forcing your hand. If works or lettings are still in progress, consider whether refinancing now or after completion would present the property better.
Lenders may be cautious if a property was bought very recently and the refinance relies on a much higher value. Evidence of what has changed, such as completed works or new leases, carries more weight than a hope that values have risen.
Consolidating several loans
Some owners use a refinance to bring several properties or loans into one facility. That can simplify administration but may tie properties together as security, meaning a problem with one could affect all of them. Weigh convenience against concentration of risk, and take legal advice on cross-charges before agreeing.
Refinancing with tenants in transition
If a main tenant has served notice, a lease is ending or a break date is approaching, lenders will factor in that uncertainty. It may be better to resolve the tenancy first, by agreeing a renewal or finding a new tenant, before refinancing. Equally, if your current loan expires before that can happen, talk to your broker early about the options, including staying with the existing lender for a period.
Hypothetical example, not a real client: an owner whose office tenant has a break approaching chooses to negotiate the tenant's renewal before refinancing, so a lender can assess secure income rather than an open question.
Remember that a new lender will also want to see how the existing facility has been conducted, so a clean payment record is part of your evidence.
Your property may be repossessed if you do not keep up repayments on a loan secured on it. Sorbus Finance is a broker, not a lender. Finance is subject to lender criteria, status, valuation and affordability. We work with a panel of lenders, not the whole market, and do not promise a rate, fee level or outcome.