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Construction facilities are written for a fixed term, usually the build program plus a few months to sell. Wet weather, trade shortages, a slow certifier or a quiet market can push a sound project past that date. The loan does not extend itself.
Option 1: ask for an extension
The cheapest outcome if the lender agrees. Ask early, in writing, with an updated program and sales report. Expect an extension fee and possibly a rate increase. Banks under pressure to reduce development exposure often say no, or offer a short extension that only delays the problem.
Option 2: refinance the completed project
If the build is finished, or nearly so, take-out funding repays the construction lender and holds the finished asset while it sells or leases. Terms on this site are from 0.975% a month, up to 75% of value, for 1 to 12 months. Where most of the project has settled and only a few units remain, a residual stock loan does the same job against just the unsold stock.
Option 3: sell faster
Discounting clears debt quickly but is permanent. The comparison between a price cut and holding finance is worked through in sell or finance residual stock.
Option 4: fund the gap to finish
Where the problem is a cost overrun rather than time, a second-ranking loan or a refinance to a lender who will fund the cost to complete may be needed. The existing lender’s consent is normally required for anything ranking behind it.
What default costs
| Before expiry | After expiry | |
|---|---|---|
| Interest | Contract rate | Default rate, often several percent higher |
| Further draws | Available | Usually stopped |
| Negotiating position | Normal | Weak |
| Refinance appetite | Broad | Narrower, with more questions |
What a new lender needs
- Current payout figure and expiry date from the existing lender.
- Occupation certificate and title status, or a program to get there.
- Sales to date, contracts on foot and the price list.
- A valuation of the completed stock.
- The exit: sale, lease-up and refinance, or both.
Timing
Eight weeks is comfortable. Four is workable. With less than two, speed matters more than price, and a short bridging facility may be the first step, replaced later by something cheaper. Whichever route, tell the current lender what you are doing. A lender who knows a refinance is in progress is far less likely to enforce.
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Get matched with a funderFAQ
What happens if the facility expires?
The loan is in default. The lender can usually charge a higher default rate, refuse further draws, appoint a receiver and sell the security. Most will talk first, but the cost rises straight away.
Can I refinance if the build is not finished?
Yes, though it is harder. The new lender needs a quantity surveyor's cost to complete and a builder willing to continue. Expect more conservative terms.
How fast can take-out funding settle?
Where the project is complete and titles have issued, a private refinance can settle in one to three weeks once the valuation is in.