In acting for both lenders and borrowers, we’ve seen that borrowers are more often reaching the end of their loan terms without having secured new finance or completed necessary property sales. If you find yourself in this position, it’s crucial to understand your options for varying or extending your loan terms and how a real estate finance lawyer can help you navigate this process.
Why might you need to vary or extend your loan terms?
There are several reasons why borrowers may need to seek an extension or variation of their loan terms, including:
- Delays in refinancing: New finance may not be in place by the original loan maturity date. The refinance process can take longer than you think, or are promised by a new lender or broker, particularly if there are pending applications at the Land Registry clogging your title.
- Pending property sales: Sales may be delayed due to market conditions or buyer issues.
- Unexpected market changes: Economic shifts can impact your ability to repay or refinance on schedule.
What are your options as a borrower?
If you are approaching the end of your loan term without a clear exit strategy, or if your agreed exit strategy is delayed, you should consider the following options:
Requesting a loan extension
Many lenders are open to extending loan terms, especially if you have a good payment history and a clear plan for repayment. An extension can provide the breathing room needed to finalise refinancing or complete property sales.
Varying loan terms
You may be able to negotiate changes to your loan agreement, such as:
- Adjusting repayment schedules
- Modifying interest rates
- Adding or removing security
- Agreeing to partial repayments or staged sales
Bridge finance
If your lender is unwilling to extend, you may need to seek short-term bridge finance to cover the gap until your new finance or sale completes.
How to approach your lender
When seeking to vary or extend your loan terms, preparation is key.
Understand your obligations
Check your loan agreement so you know the repayment date, default provisions and any higher interest rates that may be imposed for late payment. If you are unsure of the terms, contact our team who can review the agreement and the security you provided.
Communicate early
Contact your lender as soon as you anticipate a problem.
Present a clear plan
Show how and when you expect to repay the loan. Your lender will expect accurate details of any pending sales (with evidence of offers, exchanged contracts and so on) and timescales for the conclusion of any development work. If your exit route is a refinance, the lender will want to see proof of an offer.
Demonstrate commitment
Highlight your payment history and steps taken to resolve the situation.
Whilst there is no guarantee a lender will accept a proposal for variation, an early approach will help you to understand your next steps, such as finding an alternative lender.
Legal considerations and risks
Varying or extending loan terms is not without risk or cost.
Key issues to consider include:
- Fees and costs: Lenders may charge extension or variation fees, and legal fees for preparation of variation agreements.
- Changes to security: Lenders may require additional security or guarantees.
- Default risk: Failing to agree new terms could result in default and enforcement action.
How a real estate finance lawyer can help
A specialist real estate finance lawyer can:
- Review your loan agreement and advise on your rights and obligations
- Help to negotiate with your lender
- Draft and review variation or extension documents
- Protect your interests and reduce the immediate risk of default or enforcement
Conclusion
If your loan term is approaching its end without new finance or completed sales in place, it’s important to act early. Timely legal guidance can help you explore your options and avoid unnecessary complications. Contact one of our team today to discuss your options for varying or extending your loan terms and safeguarding your property interests.
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
Wright Hassall does not accept any responsibility for any loss which may arise from reliance on any information published here. Definitive advice can only be given with full knowledge of all relevant facts. If you need such advice please contact a member of our professional staff.
The information published across our Knowledge Base is correct at the time of going to press.
