Chapter 18

S constructionloan constructionloan

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Unformatted text preview: and physical work s Land development loan s Subdivision control ordinances s Impact fees ­ cost recovery fees, exaction, inclusionary zoning, etc. s CONSTRUCTION LOAN CONSTRUCTION LOAN Short­term over construction period s Interest rate is variable and usually over prime s Interest payments are deferred s LTV ratios in the 60 to 80 percent range s RISKS IN CONSTRUCTION RISKS IN CONSTRUCTION LENDING Unfinished or partially completed projects s Unknown construction risks such as weather, prices, strikes, etc. s Mechanic’s liens, personal injury, etc s Failure to meet building codes s Permanent lender commitment failure s CONSTRUCTION LOAN CONSTRUCTION LOAN PROVISIONS Reference to the promissory note s Construction procedure details s Loan disbursement details s Designed to insure expeditious construction, within budget and without additional liens s CONSTRUCTION LOAN CONSTRUCTION LOAN ADMINISTRATION s Making sure that – Construction proceeds as scheduled – Construction work conforms to specifications – Cost overruns are avoided – No other liens supercede the lender’s – Permanent lender conditions are not violated CONSTRUCTION LOAN CONSTRUCTION LOAN DISBURSEMENT Lender requires some equity s Developer wants to draw funds only as needed s Interest accrues to borrower to the end of the loan s Lender will usually charge a contract rate plus loan fees and points s...
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