Property projects rarely run exactly to plan.
Whether you’re renovating a house, managing a development, or waiting for a property sale, unexpected delays can throw even the most carefully planned timeline off course.
If you’ve taken out a bridging loan and your completion date is creeping closer, you might be wondering about your options for extending the term.
The good news is that extending a bridging loan is often possible, and there’s usually more than one way to do it.
You’ll need to act quickly though – leaving it until the last minute can limit your choices and potentially increase your costs.
How Bridging Loan Terms Work
Before we look at extending a bridging loan, let’s understand how these loans are structured.
A bridging loan fills a short-term funding gap, with most running from just a few months up to two years.
Standard Term Lengths
When you take out a bridging loan, you’ll agree on a specific end date with your lender. Most bridging loans run between 3 and 24 months, with 12 months being a common choice for property purchases or renovations.
You might hear about ‘open’ and ‘closed’ bridging loans.
With a closed bridge, you have a fixed and specific end date when you apply – perhaps when your property sale completes. Open bridging loans offer more flexibility on the end date, but you’ll still need a clear plan for repayment.
Repayment Structure
Bridge loans are set up as interest-only. The full loan amount becomes due at the end of your term, along with the interest.
Your lender will look closely at how you plan to repay the loan – this is your ‘exit strategy’. For example, if you’re buying a house to renovate and sell, your exit strategy would be using the sale proceeds to clear the loan.
Common Exit Routes
Most people repay their bridging loan through:
- Selling the property they’ve borrowed against
- Switching to a long-term mortgage
- Completing and selling a development project
- Using incoming funds, like an inheritance
Take a property purchase as an example: You might need a 6-month bridge to buy a new home while selling your current one. The sale of your existing property provides your exit strategy, and you’d choose whether to pay interest monthly or roll it up until the sale completes.
Remember, your choice of exit strategy and term length go hand in hand. If you’re planning a renovation before sale, you’ll want enough time to complete the work and find a buyer.
Understanding Term Extensions
When you need more time on your bridging loan, you have two main options.
You can either extend your current loan or set up a new one to replace it – known as refinancing.
An extension keeps your existing loan running for a bit longer, while refinancing means switching to a fresh loan, often with a different lender.
A word of warning: Your lender does not have to agree to a term extension. So always allow sufficient time to put an alternative in place.
What’s Involved in an Extension?
Getting an extension means asking your current lender to push back your end date.
You’ll need to explain why you need more time and show that your exit strategy is still solid, just delayed. For instance, if you’re selling a property, you might need to show you’ve had serious viewings and offers.
Why People Need Extensions
Building work often takes longer than planned. Let’s say you’re converting a shop into some flats. Your original six-month timeline allowed three months for construction and three months to sell.
But discovering structural issues during the build pushes everything back by two months. An extension here gives you time to finish the work properly and find buyers.
Other common hold-ups include:
- Planning permission delays
- Problems in a property chain
- Longer than expected legal processes
- Changes in local market conditions
Extension vs Refinancing
Extensions usually work out simpler than refinancing if your current lender agrees, and they’re a bit quicker.
You’ll probably pay some fees, but you won’t need a new valuation or legal work. On the flip hand, refinancing to a new lender might offer better terms or more time, even though it means starting fresh.
Most lenders will consider extending for a few extra months, and some might stretch to six months or more if your plans stack up.
Let’s talk bridging loans!
When You Might Need to Extend Your Bridging Loan
Even with careful planning, circumstances beyond your control can affect your bridging loan timeline.
Let’s look at some real-world situations where you might need extra time.
Property Development Delays
Building projects rarely run like clockwork.
You might hit a snag with planning permission – perhaps the council asks for changes to your designs, or a neighbour raises concerns about your extension plans. These discussions with planning departments can drag on for weeks or months.
Then there’s the building work itself.
Your contractor might be juggling multiple projects, leading to schedule changes. We’ve seen cases where builders have fallen behind after losing staff or running into supply problems.
The UK’s construction industry has faced materials shortages, with prices and delivery times causing headaches for developers.
Market Conditions
The property market moves in cycles, and sometimes it slows down when you need it to speed up. A house that might sell within weeks in spring could take months to shift in winter.
Local market changes play a part too – if several similar properties appear for sale in your area, you might need longer to find a buyer.
House prices can also shift while your project’s underway. If values dip, you might choose to hold onto your property rather than selling immediately. An extension can give you breathing space until market conditions improve.
Personal Circumstances
Life events can affect property plans.
You might be waiting for inheritance money to come through, but probate takes longer than expected. Or perhaps you’re caught in a property chain where someone’s purchase has fallen through, forcing everyone to readjust their timelines.
Legal issues can crop up. Title problems, disputes over boundaries, or questions about rights of way can all need sorting before you can move forward.
Getting solicitors and other parties to agree can test anyone’s patience.
Your Extension Options
When you need more time on your bridging loan, you’ll want to explore all your options.
Let’s look at what you can do and how each choice works in practice.
Working with Your Current Lender
Your first step should be talking to your broker, or your existing lender. They already know you and your project, which can make things simpler.
Start by speaking with them several weeks before your end date – the sooner, the better.
You’ll need to explain why you need more time and show how your plans have changed.
Most lenders will ask for:
- An update on your project’s progress
- Evidence of what’s causing the delay
- A revised timeline for completion
- Proof your exit strategy still works
For example, if you’re selling a property, your lender might want to see details of viewings, any offers, and letters from estate agents. If you’re doing building work, they’ll look for updated contractor schedules or planning documents.
Switching to a New Lender
Sometimes moving to a new lender makes more sense. This is called refinancing or re-bridging.
It means setting up a fresh bridging loan to pay off your current one, a bit like a remortgage. While it involves more paperwork, it can offer advantages:
- A new lender might give you a longer extension period.
- You could also find better terms or more flexibility with your exit strategy.
- You might be able to borrow more money
To switch lenders, you’ll need:
- A new property valuation
- Fresh legal work
- Details of your current loan
- Evidence of your exit strategy
The process takes time – usually 2-4 weeks. Factor this into your planning, as you’ll need everything in place before your current loan ends.
Moving to a new lender means paying new arrangement fees and legal costs. However, if you find better terms, these costs might balance out over a longer term.
Costs and Implications of Extending
Extending your bridging loan will add to your costs, so you’ll need to weigh up these expenses against your other options. Understanding all the charges helps you make a sound decision.
Additional Fees
When you extend your loan, you’ll pay an extension fee. This might be a fixed amount or a percentage of your loan balance. Your lender might also charge admin fees for processing the changes.
Let’s say you have a £500,000 bridging loan. An extension fee might be 1-2% of this amount, adding £5,000-£10,000 to your costs. You’ll need to factor these charges into your calculations.
Interest Considerations
Interest continues to build up during your extension period.
If you’ve been rolling up the interest (adding it to your loan rather than paying monthly), a longer term means more interest accumulating on the growing balance.
During the extension, you’re paying interest on both your initial loan and the interest that’s already built up. This compound effect means your balance grows faster over time.
Impact on Your Overall Costs
The longer you keep your bridging loan, the more it costs you.
But sometimes paying these extra charges makes financial sense. For instance, if rushing to sell your property means accepting a lower price, paying for an extension could work out better overall.
Consider this example: You’re selling a renovated property and have two choices.
You could:
- Sell quickly at a reduced price to meet your loan deadline
- Pay for an extension and wait for a better offer
If the extension costs less than the price reduction you’d need to make for a quick sale, extending could be the smarter choice.
How to Apply for an Extension
Getting your extension approved means starting early and being well-prepared. Here’s what you need to do to improve your chances of success.
When to Start
Begin talking to your lender as soon as you realise you might need more time.
Don’t wait until the last few weeks of your term – contact them at least 6-8 weeks before your end date. This gives everyone enough time to review your situation and sort out the paperwork.
Lenders want to see why you need an extension and how you’ll use the extra time.
You’ll need to show:
- Your progress so far – what you’ve achieved with the loan and where things stand now.
- For a renovation project, this might mean photos of the work completed and a report from your builder.
- Why you need more time – be honest about delays or changes to your plans.
- Back this up with evidence, such as emails about planning permission or notes from your estate agent about market conditions.
- Your new timeline – map out exactly how you’ll use the extension period.
- Break down what needs doing and when you expect to complete each step.
What Lenders Look For
Your lender will check several things when considering your request:
- Have you kept up with any payments? A good track record helps your case.
- Is your exit strategy still solid? Show them it’s just the timing that’s changed, not the basic plan.
- Has the property value stayed stable? They might want a new valuation if the market has shifted.
Getting an Answer
Most lenders decide within a week or so. They’ll look at your documents, perhaps ask some questions, and then make their choice. If they agree, they’ll send new paperwork showing the revised terms.
Keep in regular contact during this time – quick responses to any queries help speed things up. Remember, you need everything signed and sealed before your current term ends.
Alternatives
If extending your current bridging loan isn’t possible or doesn’t suit your needs, you may have some other options.
Let’s explore some alternatives that might work better for your situation.
Development Exit Finance
For property developers, development exit finance offers a way forward. This works particularly well if your project is nearly finished but you just need time to sell the units.
Here’s a real example: A developer in Leeds had converted an office building into six flats. Their bridging loan was ending, but they’d only sold three units. Moving to development exit finance gave them time to sell the remaining flats without rushing or dropping prices.
The new loan offered a lower rate, which helped their margin while they found buyers.
Refinancing Your Bridge
Sometimes starting fresh with a new bridging loan makes the most sense.
You might find better terms or get a longer period to complete your plans. Many lenders will consider taking over an existing bridge, especially if your project is progressing well.
There’s no guarantee that the terms will be the same, or better, than you already have.
Second Charge Options
If you can’t extend or refinance your main bridging loan, a second charge loan might help.
Second charge bridging loans could be used on another property that you own, quickly raising some extra capital.
Second charges cost slightly more that first charge loans, due to the extra lending risk.
Think of it as a short-term top-up rather than a long-term solution. You’ll need enough equity in your property to make this work, and your current lender must agree to it.
Related: First, Second & Specialist Charges in Bridging Finance
How a Broker Can Help
Working with a broker gives you access to solutions and strategies you might not find on your own.
A good broker knows which lenders are most likely to approve extensions and who offers the best terms for different situations.
They’ll handle negotiations with lenders, saving you time and often securing better terms. Many brokers have built relationships with lenders over years, meaning they know exactly who to approach for your circumstances.
If you need to look at other options, brokers can show you alternatives you might not have considered. They’ll also help you avoid common pitfalls and manage application timelines effectively.
Next Steps
If your bridging loan end date is approaching and you think you’ll need more time, don’t leave it to chance.
Remember, the earlier you act, the more options you’ll have. Whether you choose to extend with your current lender or look at alternatives, getting professional advice can save you money and stress in the long run.
Want to understand your options?
Get in touch with our team. We’ll help you work out the best way forward, whether that’s extending your current loan or finding an alternative solution that better suits your needs.
FAQ
Most lenders offer extensions from 1-6 months, though some may consider longer periods based on your circumstances and exit strategy.
Extension costs include an arrangement fee (usually 1-2% of the loan), additional interest, and possible admin charges. Your lender will outline specific costs.
If property values have changed significantly or the extension is lengthy, lenders might require a new valuation.
This depends on costs, time needed, and current market rates. An extension is often simpler, but refinancing might offer better terms.
Alternative options could include refinancing with another lender, development exit finance, or seeking a second charge loan on another property.
While possible, multiple extensions are harder to secure and may indicate problems with your exit strategy.
An extension continues your existing loan, while refinancing means taking a new loan, often with a different lender.
Yes it might. Your lender will confirm any rate adjustments.
Simple extensions don’t normally need legal work, but significant changes or refinancing will require solicitor involvement.
