Construction Loan question

[captainsling]

Your lender should be able to give you a break down of estimate of draw interest payments.

[Shane]

Thx for the info. I may be totally off on this but help me figure out where I’m going wrong here. There will be 4 draws by the builder from the lender to get the place built. For sake of argument let’s say the loan does come out to being exactly 400K, and each of the 4 draws would be approximately 100K. I only pay 5.8% interest Each month on the amount I’ve borrowed to that point. So the 1st months payment would be 5.8% of 100K, or $5,800. Then let’s say by the 2nd or 3rd month the 2nd draw takes place and now I’m paying 5.8% interest on 200K, or $11,600. After the 3rd draw the payment would go to $17,400. And then after the 4th it would go to $23,200. So I feel like I can’t be looking at this correctly because this number would be massive by the time we closed on the loan after it was built. If I’m an idiot and my logic is not even remotely correct please tell me. Also my mortgage guy told me there would be about 7K in closing costs at the end of the build.

5.8% is your annual percentage rate. Divide your interest numbers by 12 to find the amount you'd pay for 1 month's interest.

[Tex_Cattleman]

Road Dawg - please call me. I do 20-30 interim construction loans in a year. Three going currently with TBHers and a few others recently completed and are into their 30 year permanent. Happy for you to reach out to them as references.

I can walk you through the process painlessly.

I can tell you 5.8% on the interim loan is about 1% too high. You likewise want to be sure not to pay over 1/2% origination fee. 4.3% is not bad on a 30 yr fixed. I will say I locked two at 4% even today (no points).

Call any time, evening/weekends included. I'd love to help you.

Thanks,
Trey
512-203-5869
Trey@treypowers.com

[Tex_Cattleman]

Also - Do a search of thread titles...

"Home Construction Lending 101"

It's an article I had published a while back then shared with the green screen.

[Throwin Darts]

Thx for the info. I may be totally off on this but help me figure out where I’m going wrong here. There will be 4 draws by the builder from the lender to get the place built. For sake of argument let’s say the loan does come out to being exactly 400K, and each of the 4 draws would be approximately 100K. I only pay 5.8% interest Each month on the amount I’ve borrowed to that point. So the 1st months payment would be 5.8% of 100K, or $5,800. Then let’s say by the 2nd or 3rd month the 2nd draw takes place and now I’m paying 5.8% interest on 200K, or $11,600. After the 3rd draw the payment would go to $17,400. And then after the 4th it would go to $23,200. So I feel like I can’t be looking at this correctly because this number would be massive by the time we closed on the loan after it was built. If I’m an idiot and my logic is not even remotely correct please tell me. Also my mortgage guy told me there would be about 7K in closing costs at the end of the build.

(.058/12) x 100,000 is going to get you closer to the actual number. You’re looking at the annual interest and you need to be calculating monthly interest.