Construction Loan Calculator

Model a construction-to-permanent loan: interest-only payments on funds drawn during the build, then the permanent mortgage payment.

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Results will appear here once you enter your values.

Check the costs around your construction loan

Estimate financing for the lot, compare borrowing against an existing home, and account for mortgage insurance.

How a Construction-to-Permanent Loan Works

A construction loan does not hand you the full amount at closing. The lender releases money in draws as the builder finishes stages of work, usually after an inspection. While the house is being built you pay interest only on the amount drawn so far. When construction ends, a construction-to-permanent (single-close) loan converts into a regular fixed-rate mortgage, and the payment switches to principal and interest.

This calculator assumes each draw is released at the start of its month, so that month's payment is the drawn balance × rate ÷ 12. After the build it uses the standard amortization formula payment = P × r ÷ (1 − (1 + r)−n).

Worked Example

You own a lot worth $80,000 and sign a $400,000 building contract, so the project costs $480,000. With 20% required equity ($96,000), your land covers $80,000 and you bring $16,000 in cash. The loan is $384,000.

With equal draws of 32,000 a month over a 12-month build at 8%, the first payment is only213.33, rising to $2,560 in month 12 once the full amount is out. Interest during the build totals 0.08 ÷ 12 × $32,000 × (1 + 2 + … + 12) = $16,640. After conversion at 7% for 30 years, the permanent payment is $2,554.76 a month in principal and interest. Budget about 32,640 of cash through the build: the16,000 down payment plus the interest-only payments.

Why the Draw Schedule Changes Your Interest

Interest depends on when money leaves the lender, not just on the loan size. Milestone draws release larger amounts earlier in the build: foundation 15%, framing 20%, rough-ins 20%, interior 25% and finishes 20%. On the same $384,000 loan, the milestone schedule in this calculator costs about $18,560 in construction interest versus $16,640 with equal monthly draws.

Delays matter even more: every extra month at a fully drawn $384,000 balance costs another $2,560 of interest at 8%. Federal Truth in Lending rules (Regulation Z, Appendix D) let lenders estimate construction-phase interest by assuming about half the commitment is outstanding for the whole build; for this example that shortcut gives $15,360.

Costs This Estimate Leaves Out

  • Inspection and draw fees charged each time funds are released.
  • A contingency reserve many lenders require (often 5–10% of the build cost) and change orders.
  • Property taxes, builder's risk insurance and closing costs on the loan.
  • Rent or a current mortgage you keep paying while the house is under construction.
  • Rate changes on two-close loans, where the permanent rate is set only when construction ends.

Frequently Asked Questions

Common questions about the Construction Loan Calculator

No. During construction you pay interest only on the money that has been drawn. Payments start small and grow as the builder completes each stage, reaching the full interest-only amount near the end of the build.

Sources & References

Conversion of Construction-to-Permanent Financing: Single-Closing Transactions (B5-3.1-02)

How a single-closing construction loan converts to permanent financing after the build.
→Source: Fannie Mae Selling Guide

Regulation Z, Appendix D: Multiple Advance Construction Loans

Truth in Lending method for estimating interest on construction loans funded in draws.
→Source: Consumer Financial Protection Bureau

What is an interest-only loan?

How interest-only payments work and how payments rise when principal repayment begins.
→Source: Consumer Financial Protection Bureau

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