Around 30% of short-term property finance borrowers do, at some point during their term, request to extend the length of their loan with us. While we will review each and every request on its individual merits, extension requests are not automatically accepted and we will only accept requests when the borrower is able to demonstrate a real business need to extend.
Due to the commercial nature of bridging finance, extension requests are not uncommon and the reasons for the requests can be wide-ranging. The most typical reasons include:
- Planning applications have taken longer than expected to obtain
- Refurbishment works have been unexpectedly delayed (e.g. the delivery of new windows is taking longer than expected)
- The borrower is waiting to exchange on contracts where a sale has been agreed
- The borrower requires additional funds and/or time to complete his project (e.g. work to the building’s foundations was necessary but unforeseen at the time of applying for the loan)
- The borrower is waiting for a new lender to complete their due diligence before refinancing the loan
- The buyer of the borrower’s property pulls out at the last moment, forcing the borrower to put the property back onto the market.
- The new lender refinancing the property pulls out at the last moment, forcing the borrower to find another new lender.
When a borrower makes an extension request, we require a detailed rationale that is passed to one of our underwriters to consider. Our underwriting team will then review the borrower’s extension request and repayment schedule and:
- Ensure that they have been making regular interest payments, where appropriate,
- Assess their ability to continue to service the interest
- Review proof of the borrower’s exit plan and assess the viability of that exit
- Confirm that the loan has been compliant with the terms and conditions throughout.
The team will also usually request a third party valuer to revisit the property and provide a renewed valuation to ensure that the building or land upon which the loan is secured has not decreased in value since the loan was first made and that the marketability of the security has not changed for the worse.
Extensions are not hastily made. This means that sometimes, if a borrower’s request to extend is made with too little notice before the original loan expires, the loan can go ‘out of term’. When we agree to extend a borrower’s loan, this will be indicated in the loan’s activity tracker on an investor’s platform. The status of the loan remains ‘On Schedule’.
Generally speaking, a loan will be extended for no longer than three months. LendInvest will consider longer extensions that are dependent on very specific circumstances as well as close monitoring of the borrower by our team.