Loan Extension Option Value Calculator

Loan extensions reduce refi risk. This calculator values.

Loan amount

Extension fee %

Extension months

Refi risk reduction %

Refi shortfall if unsuccessful

Option net value

$280,000

Extension fee $

$60,000

Expected refi shortfall avoided

$340,000

How the math works

Extension fee = loan × fee %. Expected savings = shortfall × risk reduction. Net option value = savings − fee.

$8M loan × 0.75% = $60k fee. $850k × 40% = $340k expected savings. Net option value $280k — worth paying. In stable refi environment, option value drops to near zero.

How to Use

Enter loan amount.
Enter extension fee %.
Enter extension months.
Enter refi risk reduction probability %.
Enter refi shortfall if unsuccessful.
Read extension option value.

Frequently Asked Questions

Typical extensions?

Bridge loan: two 6-month extensions with 0.5-1% fees. Floating CMBS: one 1-year extension at 1% fee. Permanent loans: typically no extension (refinance). Extension options standard on bridge/transitional loans; rare on long-term perm.

Cost vs value?

Fee = 0.5-1.5% of loan per extension. Value = probability-weighted avoidance of refi shortfall. If refi likely succeeds, extension low-value. If refi uncertain, extension critical insurance. Pay fees when refi execution is in doubt.

Covenants?

Extension often requires: DSCR hurdle (1.15-1.25). Debt yield test (6-8%). No material adverse change. Current payment status. Insurance compliance. Borrower not in default. Lender uses extension as checkpoint — not pure option.