Formula
Finance cost ≈ Σ (drawn debt × rate) + line fees + establishment fees
WhereCalculated on the drawn balance, not the loan facility limit.
Why it matters
Finance is the largest single soft cost on most residential projects. It is sensitive to interest rate, drawdown profile, and project duration. A three-month delay can add 2–3% to TDC through finance alone.
Worked example
A 24-month construction loan with a $17M limit, drawn S-curve to a $16.4M peak, at an 8.25% interest rate, with a 1.25% establishment fee and 0.35% annual line fee:
- Average drawn balance ≈ $9.0M, interest ≈ $1,485,000 over 24 months.
- Establishment fee: $213,000. Line fee: $119,000.
Finance cost ≈ $1,817,000.
Related terms
Connected ideas in the glossary.
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