Construction Loan Fees

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These fees would not be assessed if it were not for the construction aspect of the loan (i.e., the charges would not exist "but for" the construction), thus they must be attributed to the construction-phase Integrated Disclosures.

On construction or similar loans that are associated with an underlying asset these two costs are treated very differently. Loan origination fees refer to all fees charged for the initiation and completion of the loan process, and can be calculated differently depending on the lending institution.

If the total cost of your new construction is $500,000 but the lender has released just $100,000, you will pay interest on $100,000. Typically, a commercial construction loan is structured so that the borrower pays only the interest until the loan has been fully dispersed.

If you have time to allot to the many aspects of building a home, and you’re familiar with construction work, then by all means – pick up a hammer. But remember – time is money. Unfortunately, the more a job costs a professional to do, the more of your time it’s likely to take.

Other soft costs in this category may include loan-generated interest, bank transaction fees, and accounting expenses; costs of accounting and timekeeping software; and fees such as construction loan commitment fees, mortgage broker fees, and permanent commitment fees.

by the developer of its obligations under the construction loan documents, such as the occurrence of delays in completing the project, the failure to ultimately complete the project or the incurrence.

Typically, a loan origination fee incurred to obtain a construction loan is amortized over the life of the loan. This also seems very straightforward; however, facts and circumstances may result in different treatment. For example, if the loan fees were initiated in the year the entity was organized, a portion of the loan may have been used to establish the entity and considered a start-up expense. Up to $5,000 of these costs may be deducted in the initial year.

Learn more about new construction loans and what to consider when looking to finance your dream home with help from U.S. Bank.