The spread isn't 225 basis points because the points are charged on the full commitment while construction money draws out over time. On a $2.24M facility, 2 points in and 1 out is $67,200 of fees. A ground-up draw schedule typically leaves you with an average outstanding balance around 50% to 55% of the commitment over the term, call it $1.2M. That's $67,200 of fees against an average balance of $1.2M over 12 months, so roughly 560 basis points of effective fee cost per year, not 300. Your all-in on money actually used lands closer to 16% than 10.5%. Run it as a monthly cash flow against your draw schedule rather than as a rate, because the rate is misleading by construction.
The bank side isn't free either. The extra $480,000 of equity you'd have to write has a cost, whether that's your own capital sitting in one deal or an LP taking a preferred return and a share of the upside. Price that at whatever your marginal equity actually costs and compare totals, not rates.
Then add the items that don't appear in either term sheet headline. Draw inspection fees run a few hundred dollars per draw and a 12-month build might have ten draws. Lender legal on the debt fund side is often $15,000 to $30,000 and you pay it. Unused line fees, if any. And read the prepayment section hard, because a minimum interest or yield maintenance provision meaning nine months of interest regardless of payoff date can erase the whole advantage of finishing early.
The carve-outs deserve a lawyer's eye. Non-recourse with a broad completion guaranty and a cost overrun guaranty is recourse for the part of the deal most likely to go wrong. Get the final documents, not the term sheet, before you decide.
