Does anyone have an amortization table or can provide guidance which will help me better understand how to begin amortizing principal starting at any selected period for a construction loan with unequal draws during the development period?
I calculate an assumed floating rate interest each period based on applying a forward rate curve to each period's BOP principal balance, but am struggling to understand how to begin principal amortization as the floating rate means I cannot use an equal payment... Any help would be much appreciated.
bump
What you're asking doesn't make any sense.
No construction lender amortizes a construction loan during draws. If there is any excess cash flow during construction, it is simply swept by the senior construction lender subject to any prepayment fees. If you want to amortize the loan after it is fully drawn after the property stabilzes, that's a different question and is fairly simple to compute since you know the date at which it starts amortizing and you know the principal balance, all you would need then is the debt constant at which the loan runs off before a refi.
Not during the draws but say I need to model a 3+1+1 where principal is amortized during the two extension options (after the loan is fully funded) and interest is floating the entire time.
If the principal (P) is amortized over N years then wouldn't it simply be P/N for the per annual period payment or N/12 for the monthly, and then your interest computed on your curve just computes whatever balance is outstanding..not sure what else you could be asking for here...
Does this look correct? I used the below methodology... Also see spreadsheet attachment at below link.
https://we.tl/t-uYIVpE2hQZ
https://money.stackexchange.com/questions/61639/what-is-the-formula-for…
You're lucky I actually took a look at this as I have a slow morning today..this looks OK to me. In reality there's multiple ways to do this and your interest rate will stay fixed over a certain period of time say in a 3-1-1 it's fixed in years 3, 1, and 1, whereas in yours you have it increasing monthly. One item to note is your monthly rate is I/12 I = annual, in reality the monthly rate could be # days in mo / 360, so just be sure you account for how the monthly is being computed. But this looks OK to me, at the end of the day it's whatever the lender's term sheet dictates anyway.
Great, thanks. I understand all the ways to compute interest and model accordingly but was stumped on how to account for principal payments when interest is floating. Building out the debt in the pro forma this way for my development model will allow me to turn on principal payments during any month which is what I was striving for.
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