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what is the interest rate on a construction loan

A commercial construction loan from a bank will typically have the lowest interest rate, while hard money lenders charge more interest for their loans. Fees There are several fees that may be associated with taking out a commercial construction loan.

Interest Rates. The interest rates of construction loans are usually variable. That is, they will change during the time the loan is outstanding. This interest rate is usually anchored to another, standard rate. Many of them are tied to the prime rate, which is a type of benchmark reported by the Wall Street Journal.

Construction loans typically have variable interest rates set to a certain percentage over prime (the interest rate that commercial banks charge their most creditworthy customers). For example, if the prime rate is 3 percent and your loan rate is prime-plus-2, then your interest rate would be 5 percent.

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Construction Interest Expense: Any interest that is paid during the construction phase of a building or other tangible property. The interest may be incurred directly as the result of a.

Construction loans are short-term. Interest rates are usually variable and fluctuate with a benchmark such as the LIBOR or Prime Rate. Since there is more risk with a construction loan than a standard mortgage, interest rates may be higher. Also, the approval process is different than a regular mortgage.

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Interest on the final loan, to be closed when the house is finished, will be "a half point or a point over the going rate at the time," said Mr.

Construction-to-permanent loans: a more common type of real estate loan, this one will combine the two loans (build, mortgage) into one 30-year loan at a fixed rate. This loan type will usually require more of the borrower, in terms of down payments and credit scores.

The interest rate for the permanent mortgage is locked when the loan closes at the front end of construction, meaning even if rates change.