Construction loan extensions typically cost 25 to 50 basis points per option exercised, often combined with partial recourse re-engagement (if recourse had previously burned off) and a completion-progress test. Lender review focuses on remaining work, budget adequacy, and timeline credibility for completion.
When are extensions necessary?
Construction delays are common, material shortages, permitting friction, weather, contractor disputes. Most construction loans build in one or two extension options of 6 to 12 months each. Sponsors who anticipate delay should engage the lender early to negotiate extensions before maturity.
What can derail extension approval?
Cost overruns that exceed the contingency budget without a clear funding source, mechanical liens or contractor disputes that threaten lien-free completion, or material changes to the project scope that would have changed origination underwriting. Lenders facing these issues sometimes require sponsor cash deposits as conditions.
Sources
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1
- Quarterly Banking Profile · Federal Deposit Insurance Corporation · 2026-Q1