How extensions work
An extension is a variation of your existing loan agreement. The lender agrees a new end date, sometimes with changes to the rate or terms. The lender will want to understand why the exit has been delayed, what has changed and why the new date is realistic.
Some loans include an option to extend in the original terms, often for a set fee. Check your offer, as this can make an extension simpler and cheaper.
What lenders will ask for
- An explanation of the delay and the current position
- Updated evidence for the exit: agents' reports, a refinance agreement in principle or progress on works
- An updated valuation, particularly if markets have moved or works are complete
- An up-to-date redemption figure, including rolled-up interest
Lenders are more comfortable extending where the balance, including interest, still sits well within the property's value.
Costs of extending
Expect an extension fee, often a percentage of the balance, plus legal fees and any valuation. The rate may be revised. If the loan has already passed its end date, default interest may also apply for the overdue period. See bridging loan fees.
Compare this cost with the alternative of refinancing.
Refinancing instead
If your lender declines an extension, or its terms are poor, you may refinance onto a new bridge with another lender. This needs a new valuation and legal work, and fresh arrangement fees, so allow several weeks. Refinancing works best with clear equity and a credible exit. If the property is now finished and let, a mortgage or a bridge to term product may be possible.
See what happens if you cannot repay a bridging loan for the wider picture.
Avoiding the need
The simplest way to avoid an extension is to set a realistic term at the outset, with a margin for delay. On many loans, a few extra months of term costs little, particularly if unused retained interest is refunded on early repayment. When you compare lenders on Instant Quotes, consider the term you would need if things run late, not just the best case.
Extending a development facility
Development facilities can also be extended, and the same principles apply: ask early, explain the delay and show a realistic new date. Lenders will ask the monitoring surveyor to confirm the remaining cost to complete and the programme, and may require you to fund any shortfall before agreeing.
Where the build is complete and the delay is in sales, a development exit loan is often a better answer than an extension. It refinances the development facility at bridging rates against the finished units, gives more time to sell and can sometimes release equity. Comparing an extension with an exit loan, on total cost over the realistic sales period, usually makes the choice clear.
Common questions
How much does it cost to extend a bridging loan?
Usually an extension fee, often a percentage of the balance, plus legal costs and sometimes a new valuation. The rate may also be revised.
When should I ask for an extension?
As early as possible, ideally several months before the end date. Lenders have more flexibility before a loan falls overdue.
What if my lender will not extend?
You can refinance onto a new bridge or a longer-term loan, provided there is enough equity and a credible exit.
This guide is for general information only and should not be treated as legal, tax or financial advice. Lender requirements depend on the property and your circumstances.
