Loan Example 2

Kate is a home builder and decides to buy a home lot in the Near East area of Dallas, TX to build a new single family home. In order to fund the project, she takes out a new construction loan from West Shore Funding Company with these parameters:

a) A $240,000 sales price for the lot, b) $300,000 in building expenses, c) an 70% loan-to-value (LTV), d) a 18 month term, e) a 13% interest rate, and f) a 3% origination charge.

If Kate achieves her goal of a $720,000 sales price, the final numbers of the project will be as follows:

$720,000 sales price
– $378,000 note principle (70% LTV)
– $162,000 down payment (30% on 70% LTV)
– $11,340 origination points (3% of the $378,000 principle)
– $73,710 total interest paid (18 months x 13% interest)
———————–
= $94,950 total profit