Do I Pay Closing Costs Twice? (Construction Loan, Refinance)Apr 19, 2021
In a typical new construction fourplex purchase, an investor first buys the land through a construction loan. Once the property is built, there's a long-term loan, where the construction loan is paid off and a 30-year fixed mortgage begins.
Does an investor pay for closing costs twice?
The answer is yes. For the construction costs, you'll find a page of FIG's proformas which displays all of the costs associated with construction financing. This includes the appraisal, title report, course of construction insurance, HOA reinvestment fee (helps set up the reserve fund for the HOA), lender fees, etc.
On the refinance, the base closing costs that are finance-related are pretty minimal. In a fourplex purchase, you can expect this to be around $4,000. If you want to buy the rate down or if you want to escrow for closing costs, those are variable depending on each investor and your situation. Some lenders will choose to offer those things and some won't.
Most of the time, these properties are appraising so high upon completion, that you'll have the ability to wrap those closing costs into the loan. About 90% of investors choose to do this.
They'll pick a rate cost option and say they don't want to come into closing with cash. Those costs then get wrapped into the loan. This is pretty doable on almost every development that the Fourplex Investment Group has.