In one sentence
A borrower's contractual right to extend the loan maturity, usually on conditions and for a fee.
The longer version
Extension options give the borrower flexibility at maturity, typically conditioned on no default, a minimum DSCR or debt yield, an extension fee, and sometimes a new interest rate cap. Bridge and construction loans rely on them.
Exercising an extension is a documented event with conditions to confirm, effectively a mini-closing that benefits from a checklist.
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