Refinancing Private Real Estate Debt: Extensions and Risks
Refinancing private real estate debt means renegotiating the term, price or security of a loan before it matures, usually through an extension. For an investor it is a signal worth reading carefully: it can be orderly management or the first symptom of a problem.
This text is educational. It is not investment advice or legal or tax advice.
Trends: what is happening worldwide and in Spain
- Worldwide, 22 January 2026. According to Octus, equity top-ups and refinancings made up 66% of European private credit deals in 2025. Non-accrual loans and borrowers with thin covenant headroom also increased.
- Worldwide, 25 August 2026. Debtwire data reported by Alternative Credit Investor put European direct lending at EUR 63.16 billion in the first half of 2026, a record. The second quarter fell to EUR 28.4 billion as large deals slowed.
- Spain, October 2026. The Observatory of Alternative Financing with Mortgage Collateral in Spain (Observatorio de Financiación Alternativa con Colateral Hipotecario en España), with market analysis by PwC and legal framework by Cuatrecasas, reports bank credit to construction and real estate activities at EUR 100,494 million in 2025, 80% below 2008 (original source: Banco de España, Spain’s central bank). With less bank lending, refinancing is increasingly negotiated with private lenders.
What it means for an investor in Spain: private debt is growing, and so are extensions. Knowing how they are structured helps tell orderly management from a deferred problem.
| Data point | Figure | Date |
|---|---|---|
| Refinancings and equity top-ups as a share of European private credit deals | 66% | 2025 |
| European direct lending, first half | EUR 63.16 bn | 2026 |
| European direct lending, second quarter | EUR 28.4 bn | 2026 |
What refinancing private real estate debt means
It means agreeing new terms with the borrower for a loan already granted. The three most common routes are:
- Maturity extension, with or without a fee and sometimes at a higher rate.
- Change of structure: moving to interest-only or capitalising part of the interest (see our guide to covenants for related terms).
- New security or partial repayment, to bring the loan back to a reasonable loan-to-value (LTV) ratio.
An extension is not bad in itself. A building project may be delayed by a licence, or a sale may close a quarter later. What matters is why it is requested and what changes in return.
Healthy extension or deferred problem
The same word, “extension”, hides very different situations. These questions help tell them apart:
| Question | More reassuring sign | Warning sign |
|---|---|---|
| Why is it requested? | Isolated, documented delay | Unexplained lack of sales or cash |
| What does the borrower contribute? | Partial repayment or extra security | Nothing: only more time |
| How is the collateral valued? | Updated, independent valuation | Old or outdated valuation |
| Are covenants met? | Comfortable headroom | Minimal headroom or breaches |
| Is there an exit plan? | Sale or refinancing with a date | Generic plan |
Covenants and the maturity wall are two key pieces. If many loans fall due at once and the market does not refinance, extensions multiply.
Illustrative and hypothetical example
A EUR 1,000,000 loan secured on a property valued at EUR 1,600,000 (LTV of 62.5%), for 24 months at an annual rate of 10%, similar to the average market levels cited by the Observatory. At maturity the borrower asks for 12 more months. A rate of 11% and a 1% fee are agreed.
| Item | Amount |
|---|---|
| Interest over the initial 24 months | EUR 200,000 |
| Interest over the 12-month extension (11%) | EUR 110,000 |
| Extension fee (1%) | EUR 10,000 |
| LTV at the initial valuation | 62.5% |
| LTV if the value falls by 15% | 73.5% |
The reading is twofold. The extension may compensate for the longer term, but a fall in value raises the LTV and leaves a thinner safety margin. That is why updating the valuation is part of the decision, not a formality.
What the management team should review
Faced with an extension request, a diligent manager asks for fresh documentation: the status of the works or the sale, cash statements, an updated valuation and the expected timetable. It also checks that the amendment is formalised before a notary where required and that the security keeps its ranking. Without that review, a longer term simply moves the problem into the future.
Risks to consider
- Default and capital loss risk. An extension can hide a problem that reappears at the end of the new term. Read also about hidden defaults.
- Valuation risk. If the property loses value, the collateral covers less.
- Term and liquidity risk. Your money may stay tied up longer than expected.
- Legal risk. A poorly documented amendment may affect the security or its ranking.
Property collateral mitigates risk but does not eliminate it.
How Ondara works
Since 2018, the Ondara Group management team has analysed each transaction individually, with real assets as collateral and with diversification in mind. Investors deal directly with the team. The minimum investment is EUR 25,000. Ondara aims for target double-digit returns, never guaranteed. You can meet the team on who we are and see the group brands on brands.
Frequently asked questions
What does refinancing private real estate debt mean?
It means renegotiating the term, price or security of a live loan, almost always extending the maturity.
Is an extension bad news?
Not necessarily. It depends on the reason, on what the borrower contributes and on the state of the collateral.
What happens if the borrower cannot repay at maturity?
The loan can be refinanced, restructured or the collateral enforced. Timing and outcome depend on the case and are not assured.
How does an extension affect LTV?
It does not change it by itself, but if the property loses value the LTV rises and the margin shrinks.
What should an investor ask for?
The reason for the extension, an updated valuation, the status of covenants and the exit plan with dates.
In summary
- Refinancing is common in private credit: in Europe, together with equity top-ups, it was 66% of 2025 deals.
- What matters is not the extension, but its reason, what is given in return and the collateral value.
- An illustrative example shows that a fall in value can push LTV up quickly.
- There is always a risk of capital loss, illiquidity and term risk.
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This article is for information purposes only and does not constitute an investment recommendation or financial advice. All investments carry risks, including the possible loss of the capital invested, and past or target returns do not guarantee future returns. Analyse each opportunity with a professional before investing.
