Interim financing costs are associated with financing the construction phase of the project, before the project is completed and ready for occupancy. These costs are particularly sensitive to the amount of time it takes to complete the project, as the longer a construction loan is out, the more interest must be paid to the lender. These costs include:
- Construction Insurance. Real estate attorneys and insurance agents can help to determine the cost of insurance during construction. Lenders may have their own insurance standards needed during construction, so you may wish to consult them.
- Construction Interest. Interest accrues on the construction loan during the construction period and must be paid according to specific terms. Because the amount of construction interest depends on the specific terms of your construction loan, it is computed under the Construction Interest Calculation portion of this worksheet.
- Construction Loan Origination Fee. Loan fees and points reimburse the lender for the overhead costs of providing a loan.
- Title and Recording Costs (for the construction loan). These items are the costs of making sure that the owner/sponsor has clear title to the property before construction starts. Title insurance protects the lender, while recording the deed protects the title. The mortgage held by the lender must also be recorded. The sponsor's attorney or a title insurance company can estimate these costs, given a specific property and an estimate of development costs.
- Use the Other Interim Financing Costs field to enter costs related to interim financing that are not represented by the other items in this category. Enter a label (replacing the "Other Interim Financing Costs" text) and an amount. If you do not need to use this field, simply leave it blank.