Dynamic Principal Amortization - Floating Rate Construction Loan

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.

 
Most Helpful

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.

 

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...

 

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.

 

Animi quia iste et sed cum dolores. Non recusandae rerum maiores quis inventore.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
BankonBanking's picture
BankonBanking
99.0
4
Betsy Massar's picture
Betsy Massar
99.0
5
dosk17's picture
dosk17
98.9
6
CompBanker's picture
CompBanker
98.9
7
kanon's picture
kanon
98.9
8
GameTheory's picture
GameTheory
98.9
9
DrApeman's picture
DrApeman
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”