Construction Loan Calculator

Calculate construction loan draws, interest during construction, and permanent mortgage payments.

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Construction Loan Formulas: Loan Amount = Total Project Cost - Down Payment Draw Amount = Loan Amount / Number of Draws Construction Phase (Interest-Only): Monthly Interest = Current Drawn Balance * (APR / 12) (Balance increases with each draw) Permanent Mortgage: Monthly Payment = P * [r(1+r)^n] / [(1+r)^n - 1] Where: P = Loan Amount, r = Monthly Rate, n = Number of Payments Total Cost = Down Payment + Construction Interest + Permanent Mortgage Payments
Example: Total Project Cost: $400,000 Down Payment: $80,000 (20%) Construction APR: 7.5% Construction Period: 12 months Draws: 5 (every ~2.4 months) Permanent APR: 7.0% Loan Term: 30 years Loan Amount = $320,000 Draw Amount = $64,000 Avg Construction Interest ≈ $1,400/month Total Construction Interest ≈ $16,800 Permanent Payment ≈ $2,129/month You pay interest-only during construction, then convert to full mortgage payments.

How does a construction loan work?

Construction loans provide funds in draws as the project progresses. You typically pay interest-only during construction on the drawn amount, then convert to a permanent mortgage or refinance.

What are loan draws?

Draws are scheduled disbursements of loan funds as construction milestones are completed (foundation, framing, roofing, etc.). The lender inspects before releasing each draw.

Do I pay interest during construction?

Yes, you pay interest only on the amount drawn so far. As more draws are taken, your interest payment increases. This calculator estimates average interest during the construction period.

What happens after construction is complete?

The construction loan typically converts to a permanent mortgage (construction-to-permanent loan) or you refinance into a traditional mortgage. The permanent loan includes both principal and interest payments.

What are typical construction loan terms?

Construction loans usually have 6-12 month terms with interest rates 0.5-1% higher than traditional mortgages. Down payments range from 20-25% of total project cost.