Plan Your Exit Before You Borrow

Every private loan has two dates that matter: the day it closes and the day the principal is due. GAP loans have monthly interest-only payments, so the full amount you borrowed comes due at maturity. A loan exit strategy is simply your plan for repaying it, and it is one of the first things a lender looks at. This guide explains how to build one before you borrow.

Why lenders ask about the exit first

A lender is protected by a first-lien mortgage, but no lender wants to rely on enforcing it. What they want to see is a clear, believable way the loan will be repaid on time. A strong exit can make a loan easier to place; a vague one can stop it. When you request a loan, be ready to explain your loan exit strategy in a few sentences, with any documents that support it, such as a listing agreement, a refinance application or proof of other funds.

Common exits

• Selling the property that secures the loan, with the loan paid off from the proceeds at closing.
• Selling another property you own.
• Refinancing with a bank or another lender. Banks set their own requirements and can take many months, if not longer, to close, so start early.
• Business income or a known payment, such as a contract or the sale of a business asset.
• Other funds you can document.

Test your exit before you sign

Ask yourself what could go wrong with each step:

• How long will it realistically take? A property sale includes marketing, negotiation and closing.
• Is the price or amount you are counting on realistic, or optimistic?
• What happens if it takes three months longer than planned?
• Do you have a second option if the first one fails?

Choose a term that fits the exit

GAP loans run from six months to three years. Choose a term that covers your exit with room to spare, rather than the shortest possible term. If you repay early, remember that early repayment has a penalty that depends on the lender, so ask about it before you sign.

Three example exits

These are illustrations, not client cases:

• Renovate, then sell. An owner borrows against a house, renovates it and repays from the sale. See borrowing to renovate before you sell.
• Buy before selling. An owner borrows against one property to buy another, and repays when the first one sells.
• Bridge to a refinance. A borrower uses a short private loan while arranging longer-term financing, and repays when it closes.

If the exit is running late

Talk to the lender early, before the maturity date, not after. Any change to the loan terms is the lender’s decision and must be documented by attorneys. If a loan is not repaid, a properly registered mortgage is an enforcement title under Law 8624, article 8, and the lender can enforce it through the courts, including auction. What happens if a borrower stops paying explains that process.

Frequently Asked Questions

What is a loan exit strategy?

It is your plan to repay the principal at maturity, for example by selling a property, refinancing or using other funds.

Do I need an exit plan to apply?

Yes. How you will repay is one of the main things GAP and the lender review.

Can I repay before maturity?

Yes, but early repayment has a penalty that depends on the lender.

What if my sale is delayed?

Contact the lender before maturity. Any change to the terms is up to the lender and must be documented.

This article is general information only and is not legal, financial or tax advice. Examples are illustrations. Every loan depends on property review, documentation and lender approval.

Start a loan request with GAP Equity Loans → · WhatsApp us at +506 4001 6413 to get started, call or email [email protected]