I’ve been working on converting a single family to a multi using a construction loan. Lender has extended the loan twice already penalty free of any fees. Now we’re right at the finish line with about two months of work left, and lender is only giving one month to complete the project.
Worried we won’t finish according to the bank’s timeline due to weather delays etc....in that event what can I do as a backup plan in case the full loan is needed to be repaid? ($120k)
I know I might be able to get lender to extend further by paying fees, but not sure what other options I have to mitigate risk.
If we finish project on time, loan will convert to principal and interest.
Push them to extend and pay the fee. Its worth it, you don't want to go into pre foreclosure because it will make it near impossible to refi if you plan on keeping it. Also once the bridge loan matures and they send the request for payment you usually have 30 days to pay. But I wouldn't want to cut it that close. It will be worth the extra fees for the extension so you don't have to deal with the headaches of having the lender coming down on you.
@Matthew Crivelli thanks for the advice. I think if we get close enough to finishing and show good progress over the next month, I can’t see the bank being unwilling to extend, especially with paying the fee they set.
I Agree, pay the extension fee and note where you went wrong in your timeline of construction so you can help not repeat the mistake. Granted, many delays are beyond our control, particularly during COVID, none the less, learn from what went wrong and fix it. That is how you grow.