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Commercial interest rates!?

  • 11-04-2013 1:02pm
    #1
    Paulbut2000
    Registered Users, Registered Users 2 Posts: 16 ✭


    Hi all, I am currently in the middle of a project for college and I'm doing a residual valuation on the purchase of land in navan to construct a 72 bed nursing home.

    My question is what interest rate to use for construction costs? I would be borrowing about 5 million. Plus what is a base interest rate? Any help is appreciated.
    Tagged:


Comments

  • #2
    homer911
    Registered Users, Registered Users 2 Posts: 5,150 ✭✭✭homer911


    3-month EURIBOR would be your base rate. Margin would be based on the risk, say 3-4% on top..

    http://www.euribor-rates.eu/


  • #3
    Paulbut2000
    Registered Users, Registered Users 2 Posts: 16 ✭Paulbut2000


    Ok cool thanks, so I see a rate of 0.554% gor 3 month so your saying 3.554% would be the interest rate adding 3% for risk?


  • #4
    foundation10
    Registered Users, Registered Users 2 Posts: 242 ✭✭foundation10


    I would say to factor in a rate somewhat closer to7/8%. The days of cheap money are over and especially the risk associated with a nursing home these days any bank would deamand a decent risk premium closer to 5%. I also think that when banks are pricing loans these days that the euribor is largely ignored and their sole focus will be on the risk and what the project entails. Best of luck with it.


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