Repositionong, Rehab or Construction - Interest Only 18 to 30 Months
Typical Commercial Construction Financing Terms Note: These are not terms of any specific lender. They represent terms that we frequently see in the marketplace and are not to be relied on as a commitment to provide any specific terms for any specific deal.
Maximum Loan To Cost (LTC): 60% to 75%
Maximum Loan To Value (LTV): 70% to 80% of completed value. Term: Generally 1 to 2 years with extensions as necessary.
Amortization: Interest only
Typical Rates: Prime plus 0.5% to 2.0% or LIBOR plus 3.0% to 4.0%
Prepayment terms: No prepayment penalty - but these loans often have a 1% exit fee if permanent loan is not done with same lender.
Projects: All commercial property types can be financed. Developer and contractor must have experience at this type and scale of development.
Recourse: Typically recourse. A few lenders offer non-recourse construction financing for larger loans.
Closing costs: Borrowers are responsible for all due diligence and closings costs (e.g. Appraisal, Phase 1 Environmental, site inspection, title, etc)
Loans under $3M - costs range from $6,000 to $12,000
For loans over $3M - costs can be $20,000 or more
Most construction lenders also charge a loan fee.
Rule of Thumb Lending Limits:
Hard Money to 50% LTC or 60% ARV (After Repair Value) Private Lender to 60% LTC or 70% ARV Bank to 75% LTC or 65% ARV Investment Bankers to 80% LTC or 75% ARV Correspondent to 80% LTC Hedge Funds to 70% LTC Mortgage Banker to 85% LTC Up to 90% LTV available with Seller Carryback