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Interest Reserve Depletion Calculator
Interest reserves deplete during construction; equity covers post-depletion.
Months to depletion
12
Avg monthly burn
$100,000
Final month interest
$121,190
How the math works
Deplete reserve month by month; interest grows monthly as loan balance grows.
$1.2M reserve at $85k/mo growing 3% = depletes in ~12-13 months. Avg burn $95k/mo.
How to Use
- Enter interest reserve balance.
- Enter current monthly interest.
- Enter monthly interest growth %.
- Read months to depletion.
Frequently Asked Questions
Depletion pace?
Early construction: low interest (most loan undrawn). Mid construction: accelerating. Late: high (most loan drawn). Interest compounds if reserve insufficient. Monitor weekly near depletion.
Post-depletion?
Borrower funds interest from equity. Can extend construction loan (with fee). Can add interest reserve fund extension (premium cost). Can stop draws to slow spending. Each option expensive and impacts project economics.
Prevention?
Size reserve with 20-30% buffer at origination. Monthly monitoring. Lender requires equity injection if reserve falls below threshold. Construction acceleration if delays. Early conservative rebaseline if trends negative.
How often should I rerun this?
Rerun this calculator whenever inputs change materially — new rent roll data, rate moves, loan balance updates, or quarterly operating data. For active deals, monthly refresh is typical. For stabilized assets under monitoring, quarterly is fine. Treat the output as a decision tool, not a one-time answer — market conditions evolve and so should your analysis.
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