Ground-Up Construction Rates

Rate Range:

9.00% – 11.00%

Ground-up construction loans carry elevated risk due to entitlement, build-out, and market-timing exposure, which is reflected in pricing and structure.

Key Factors That Impact Your Rate

Loan-to-Value (LTV) / Loan-to-Cost (LTC)

  • Lower leverage = lower rate

  • 60–65% LTV → best pricing

  • 70–75% LTV → higher end of the range

Property Location

  • Strong, liquid markets → better pricing

  • Primary / Tier-1 metros → lowest rates

  • Secondary markets → mid-range pricing

  • Tertiary or rural markets → higher rates due to exit risk

Credit Score

  • 740+ FICO → strongest execution

  • 700–739 → moderate pricing adjustments

  • 680–699 → higher rates and stricter structure
    (680 typically minimum)

Cash Reserves

  • Liquidity is critical for construction

  • 9–12+ months of interest and carry reserves preferred

  • Limited reserves may require interest escrows or higher pricing

Investor / Developer Experience

  • Proven build history = better pricing

  • 5+ completed ground-up projects → best rates

  • 1–4 projects → mid-range pricing

  • First-time developers → Higher Rates

Origination Costs

  • Construction loans involve significant oversight and draw management, which increases origination costs.

  • Standard origination costs on ground up construction loans range from 1.5-3 points.

Why Investors Use Ground-Up Construction Loans

  • Funds acquisition and construction in one loan

  • Interest-only payments during construction

  • Draw-based funding tied to project milestones

  • Designed for value creation and development strategies