TRID: Construction Loan APRs

Calculating the Annual Percentage Rate on a construction loan can be a little tricky as there are actually a couple of options to consider. Regulation Z states that creditors may use, at their option, the following methods to estimate and disclose the terms of multiple-advance construction loans…

1. Assume that one-half of the commitment amount is outstanding at the contract interest rate for the entire construction period. [TILA Appendix D Part I and Part II (A)(1)]; Or
2. Assume that the entire commitment amount is outstanding at the contract interest rate for the entire construction period. [TILA Appendix D Part I (B)(1) and Part II (A)(2)]

The APR will vary depending on the assumption you choose. While many institutions have loan systems to calculate the APR, it’s not a bad idea to double check it from time to time.

Jerod provides a few tools that could help you.

Published
2024/07/19