Maryland New Construction Loans

A Guide to New Construction Loans in Maryland
Business owners who are looking to expand should consider a commercial construction loan. A commercial construction loan is for business owners who want to renovate an existing commercial space or construct a new building. Unfortunately, many business owners don’t have the money to fund a construction project. Commercial construction projects can take thousands of millions of dollars to complete. A solution to this problem could be a commercial construction loan.

What is a Maryland New Construction Loans?
A commercial construction loan is used to pay for a commercial construction project or renovation project. It is not for business owners who want to purchase an existing commercial property. They would need to apply for a commercial mortgage.

A Maryland commercial construction loan allows you to pay for property, materials, labor, and other costs. It is different than a regular loan. Many loans give the borrower a large sum at once, but a commercial construction loan pays at certain periods during the construction or renovation project. Most traditional loans, such as commercial mortgages, have a monthly repayment plan that lasts at least 10 years.

Commercial construction loans issue a series of payments that are disbursed throughout the construction/renovation project. When a borrower takes out a commercial construction loan, he or she will meet with the lender to create a draw schedule.

What is a draw schedule? A draw schedule sets milestones in the construction/renovation project. When a milestone is completed, the lender will issue a partial payment of the loan to the borrower. An inspector will probably visit the site to ensure that the work has been completed. The draw payments will continue until the project is finished.

With a commercial construction loan in Maryland, borrowers only have to pay interest on the amount that has been issued. Say that you took out a commercial construction loan in the amount of $500,000. If $200,000 of the total amount has been disbursed, then you are responsible for paying interest on $200,000.

When the borrower has completed his or her project, the remaining interest, principle, and other fees can be payed in one payment. Borrowers who do not want to make one payment can apply for a commercial mortgage. The funds from a commercial mortgage are used to pay the balance of the commercial loan. With commercial mortgages, the property that was constructed or renovated will be used as collateral.

Interest Rates, Fees, and Down Payments
While it will vary based on the lender, most lenders offer interest rates that are between 4% to 12%. There are also fees associated with commercial construction loans. These fees may include:

  • Guarantee fees;
  • Fund control fees;
  • Processing fees;
  • Documentation fees;
  • Project review fees.

Most lenders want a down payment that is between 10% to 30% of the entire cost of the project. Lenders will look for borrowers that have good credit scores. Those who have high credit scores are low risk and may also be offered lower interest rates.

How to Prepare
When you are applying for a commercial credit loan in Maryland, you should have a project plan that outlines each step of the construction or renovation. Most lenders will also want to see the cost estimates for materials, labor, property, and other associated expenses.

Would you like further details about new construction loans in Maryland? If so, we invite you to contact us at Delancey Street. Our team is standing by to provide you with more information about new construction loans.

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