Reviewing borrowing arranged years ago, against a reimbursement position and a lending market that have both moved since.
When it is worth looking
- The facility was arranged some years ago, on terms set in a different market
- A fixed rate period is ending
- Notional rent has been reviewed upwards since the borrowing was arranged
- A partner is retiring and the premises capital needs restructuring
- You want to release capital for a refurbishment or an extension
- Several facilities could be consolidated
That third point is the one most often missed. If notional rent has been reviewed upwards since your facility was written, the practice can potentially support more borrowing than the original assessment allowed, and on better terms, because the serviceability position has strengthened.
The arithmetic
Three numbers decide whether a refinance is worth doing.
Early repayment charges on the existing facility. On commercial term lending these can be substantial, and they are the most common reason a sensible-looking refinance does not stack up. Get the redemption figure first.
Costs on the new facility: valuation, legals and arrangement fees.
The saving over the remaining term, not as a monthly figure. A lower payment achieved purely by extending the term is not a saving.
We will run that comparison honestly, including telling you when it is not worth moving. The commercial mortgage calculator gives a quick first view.
Refinancing around a partnership change
A partner retiring with capital in the premises is the most common trigger for a refinance, and the one where doing it properly matters most.
Rather than layering a buy-out facility on top of existing premises borrowing, it is frequently better to restructure the whole position at once: new facility, new term, sized to the current reimbursement position and the continuing partnership. That usually produces a lower total cost than two facilities running in parallel.
See partnership buy-in and buy-out finance.
Releasing capital
Where borrowing has been paid down and notional rent has held or improved, there is frequently meaningful headroom. Releasing it can fund a refurbishment, an extension, or a partner buy-out without a separate facility.
Common questions
Will refinancing affect our banking relationship?
Practically, no. Commercial lending is transactional. It is also worth telling your existing lender you are reviewing. They will sometimes improve terms to retain the business, which is a good result either way.
Can we refinance mid-term?
Yes, subject to early repayment charges. Establish those before anything else, because they determine whether the rest of the exercise is worthwhile.
Does a notional rent review affect what we can borrow?
It can, significantly. Because serviceability on GP premises is frequently driven by notional rent, an upward review can materially change the borrowing available. Worth reviewing your facility after any rent review.
All figures are indicative and subject to lender assessment, your circumstances, valuation and prevailing market conditions. Commercial mortgages and unregulated bridging loans are not regulated by the Financial Conduct Authority. Property offered as security may be at risk if you do not keep up repayments.