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What are the up-front costs for borrowing?

April 26, 2017Borrowing costs up-front

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What are the up-front costs for borrowing?

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Both tax-exempt bonds and taxable loans have a number of up-front fees in common. These include legal fees, consultant fees, title insurance, environmental reviews, and commitment fees. In addition, tax-exempt bonds have fees for the investment banker for selling or placing the bonds, the bond issuing agency and its counsel, the State and the Department of Health and in some cases, fees to insurance companies and banks that provide a guaranty for the tax-exempt bonds. A good rule of thumb is to use a cost of issuance of 4% to 6%, depending on the amount of the loan. The greater the loan, the lower the cost of issuance as a percentage of the loan amount.