Friday, December 23, 2005

Painful Surprise on the House Project

I had originally taken out a construction loan with First Horizon. This was a "one-time closing" arrangement, where a lot of the closing costs associated with the final loan were rolled into the construction loan costs. As time went on, and interest rates rose, my credit union became far more competitive on the permanent loan, so I decided to make them my permanent lender.

We just did the closing on the permanent loan Wednesday--and it turns out that there is more than $8000 in fees associated with the construction loan, above and beyond the interest and payments made to the builder.

I don't know at this point that First Horizon did anything wrong. I need to go back over the paperwork, and make sure of this. But it was a painful surprise. I was expecting a loan origination fee of 1% of the loan amount--okay, that's about $2150. But where did all these other fees come from? Each time that they issued a draw to the builder, they charged an inspection fee for someone to come up and verify that the work being paid for had been done. There's title insurance. Still, there's more than $6000 after the loan origination fee. This is going to require some careful examination of the fees charged.

The experience with First Horizon hasn't been exactly wonderful up to this point, anyway. My builder has lots of experience dealing with construction loan companies, and he was startled at how slowly they processed draw requests--far longer than made any sense.

Lesson learned: next time, I'll sell bonds, and pay cash for the construction.

UPDATE: It turns out that about $1400 of this was interest for December, bringing down the unexpected amount to about $5500--I'll try to decode the babble of the closing paperwork and figure out where all that money went.

Last house project entry.

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