| For | Builders comparing business-purpose construction financing |
| Bring | The same budget, land position and schedule to each comparison |
| Decision | Usable funding, cash timing and total cost through the exit |
Compare construction loan term sheets on usable proceeds, cash timing and the cost to reach your planned exit. A lower interest rate does not tell you whether the initial advance pays off the land debt, whether you can cover contractor invoices before reimbursement, or what happens if the project runs late.
Stonehaven acts as your mortgage broker. We help organize the project, compare proposed structures and identify questions to resolve before you commit. This guide concerns investment and development projects, not consumer construction of a personal residence.
Start with one budget and one set of dates
Give each proposal the same land basis, existing payoff or purchase price, hard costs, soft costs, contingency, financing allowance and estimated completed value. Then compare the proposed closing date, first draw, construction completion and sale or refinance date. Otherwise, two appealing percentages may describe different projects.
Use the construction loan calculator to separate the cost basis from uses still to fund. The calculated funding gap is a planning figure, not cash due on a settlement statement.
Eight questions to put beside every proposal
| Item | What to confirm |
|---|---|
| Total commitment | Does the figure include the construction holdback and interest reserve? What amount is actually usable for the project? |
| Initial advance | After land acquisition or payoff, withheld fees and reserves, what remains available at closing? |
| Cost and value limits | What costs qualify for LTC? Which land basis is accepted? What changes if the completed appraisal is lower? |
| Draw mechanics | Who pays invoices first? Confirm inspections, documentation, retainage, deposits and any minimum draw amount. |
| Interest and fees | Confirm fixed or floating rate, index and floor if applicable, drawn-balance versus commitment basis, origination, draw and exit charges. |
| Maturity and extensions | Is the term measured from closing? Ask for extension conditions, fees and approval requirements in writing. |
| Guarantees and obligations | Identify completion, payment, carry and other guarantees, plus any conditions for reducing or releasing them. Have counsel review legal obligations. |
| Repayment and releases | For sales, check minimum interest and release amounts. For a refinance, test the required rent, value and completion conditions separately. |
Example: a lower rate can accompany a larger funding gap
The following is hypothetical, not a quote or a closed Stonehaven loan. Assume accepted land basis of $500,000, an existing $200,000 land payoff and $1.5 million of remaining costs, including a financing allowance. Total cost basis is $2 million; remaining cash uses are $1.7 million. Assume completed value supports both proposals.
| Measure | Proposal A | Proposal B |
|---|---|---|
| Loan commitment | $1,500,000 (75% LTC) | $1,600,000 (80% LTC) |
| Remaining uses less commitment | $200,000 | $100,000 |
| Assumed annual interest rate | 9% | 10% |
| Assumed average drawn balance for 12 months | $900,000 | $960,000 |
| Illustrative interest for 12 months | $81,000 | $96,000 |
| Assumed origination charge | 2% = $30,000 | 1% = $16,000 |
| Interest plus origination only | $111,000 | $112,000 |
In this example, the higher-rate proposal has a $100,000 smaller funding gap and only $1,000 more in the two illustrated charges. That does not make it the better loan: draw timing, guarantees, other fees and the exit still matter. Average drawn balances are assumed at 60% of each commitment; actual interest follows the loan documents and funding schedule. Replace the original financing allowance with the complete expected charges before finalizing the gap. Do not add the same fees twice.
Check the money available on the first day
Suppose a proposal advances $300,000 at closing, applies $200,000 to existing land debt and withholds $40,000 for specified charges and reserves. Only $60,000 remains from that advance before any other closing uses. The total commitment may be much larger because construction money is held for later draws. Ask for this reconciliation in dollars.
Read the draw procedure before signing
The AIA payment-application summary shows why completed work, stored materials, previous payments, change orders and retainage need separate tracking. Your financing may use different documents. Ask for the actual draw instructions and a sample request package.
NCUA construction guidance emphasizes monitoring the budget, schedule and disbursements as a project progresses. For your comparison, translate that into practical questions: who inspects, what stops a draw and who funds a cost increase? Review our construction draw cash-flow guide for the timing issue.
Test a delay and the intended exit
Ask each provider to explain the same delay scenario. At a hypothetical $1.4 million drawn balance and 10% simple annual interest, three extra months cost $35,000 in interest before extension fees, taxes, insurance or other carry. Check the remaining interest allowance against that scenario rather than assuming the original reserve lasts.
For several spec homes, review project exposure and unit releases. For a rental exit, compare the future permanent loan with the projected construction payoff using our build-to-rent refinance guide. A planned refinance is not a guaranteed takeout.
What should you send Stonehaven for a comparison?
- Project location, intended use and number of units.
- Owned-land basis and debt, or purchase price and contract timing.
- Remaining itemized budget, completed value estimate and build schedule.
- Relevant completed projects and the contractor’s role.
- Your requested financing, cash plan and intended sale or refinance.
Start with the construction inquiry. Mention that you have proposals to compare; we can arrange the next step for private documents. Initial feedback is not credit approval, and financing remains subject to underwriting and program availability.
Sources and scope
Reviewed October 28, 2026. The OCC Commercial Real Estate Lending handbook discusses project budgets, equity, cost/value analysis and loan administration. OCC and NCUA materials guide their regulated institutions; they do not establish universal Stonehaven terms. The examples and comparison questions here are Stonehaven educational analysis. A term sheet’s legal effect depends on its wording and circumstances; obtain legal advice before signing obligations.