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Estimating construction loan interest

How is interest estimated for a multiple advance construction loan?

The integrated disclosure rules do not specifically address the issue of estimating interest on a construction loan. The rules generally require that estimates be made using the best information reasonably available to the creditor at the time it is disclosed. Traditionally construction interest for a multiple advance construction loan has been estimated using the rules from Appendix D of Regulation Z, which requires use of the assumption that one-half of the commitment amount is outstanding at the contract interest rate for the entire construction period. That appears to be the safe way to calculate interest disclosed on the integrated disclosure for multiple advance construction loans.

Learn more about Jack Holzknecht’s webinar TRID for Construction Loans

First published on 01/19/2020

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