Glossary definition
Extension Fee
A fee charged by the lender for extending the term of a loan facility beyond its original maturity date, typically expressed as a percentage of the outstanding loan balance. Extension fees on development finance facilities usually range from 0.5% to 2% and may be accompanied by an increased interest rate for the extension period.
Definition
A fee charged by the lender for extending the term of a loan facility beyond its original maturity date, typically expressed as a percentage of the outstanding loan balance. Extension fees on development finance facilities usually range from 0.5% to 2% and may be accompanied by an increased interest rate for the extension period. Borrowers should negotiate extension options and associated costs upfront in the facility agreement to avoid punitive charges if the build programme overruns.
See also
Closely related terms.
Arrangement Fee
A fee charged by the lender for setting up a loan facility, typically expressed as a percentage of the gross loan amount.
Exit Fee
A fee charged by the lender when a loan is repaid, typically expressed as a percentage of the gross loan amount or sometimes as a percentage of the GDV.
Facility Agreement
The legal contract between a borrower and a lender that sets out all terms and conditions of the loan including the facility amount, interest rate, drawdown mechanics, repayment terms, covenants, and events of default.
Default Interest
An increased rate of interest charged by the lender when a borrower breaches the terms of their facility agreement, typically triggered by a missed repayment, expiry of the loan term, or breach of a financial covenant.
Further reading
Guides that touch this term.
Guide
Hidden Arrangement Fees in Development Finance: What Lenders Don't Tell You
Arrangement fees in development finance are rarely as straightforward as a single percentage. This guide exposes the hidden layers of fees that lenders charge and shows you how to negotiate effectively.
9 min read readReadGuide
How Does Development Finance Work? A Complete Guide for UK Developers
A ground-up guide to how development finance is structured in the UK, covering loan mechanics, drawdown schedules, monitoring surveyors, and what lenders look for in your application.
5 min read readReadGuide
What Happens When a Development Loan Defaults? A Step-by-Step Guide
A detailed walkthrough of the development loan default process in the UK, from initial breach notice through to enforcement, and what developers can do at each stage to protect their interests.
12 min read readRead
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