Construction Loan to Senior Loan Question
Has anyone seen a Lender provide a senior loan up front and then hard costs and full soft costs based on draw requests after the initial draw on the full senior loan? Is this a perm or construction loan? Confusing situation it seems if it's a senior loan there's no way it could be used for construction right?
That’s a construction loan which can be synonymous with senior loan.
So I'm new but can you explain. A senior loan is generally safer, maybe to refi previous debt and the safest debt position. That can be considered a construction loan, so is it based on what it's used for that determines the name (senior loan but it can be an acquisition loan, construction loan, perm loan all different rates, variable or fixed, corresponding terms to the type?). Also I guess a senior loan that is a construction loan can have a fixed or floating rate and generally construction loans are short term floating rate (but can be fixed). Basically to sum up it can be a construction loan, called a senior loan and senior only says what position it is in the cap stack for debt?
Correct
Isnt senior loan just its seniority, meaning its place in the capital stack and privileges in case of for example bankrupcy. Meanwhile, construction loan just specifies its purpose. I believe construction loans are typically senior loans because they are you only loan at the time and when you refi it goes away or is replaced.
Are you asking if lenders can provide a construction to perm loan? Generally, they have a fixed rate from day 1 that you are locked into, I/O until you are stabilization and a predetermined DSCR, or DY earn out upon stabilization.
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