Construction Loan Calculator

- May 14, 2025

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Calculate your construction loan payments, interest during construction, and estimate the transition to a permanent mortgage. This calculator helps builders and homeowners understand the financing costs of new construction projects.

Project Details

Total Project Cost:

Include all construction costs, land, fees, etc.

Down Payment:

Typically 20-25% for construction loans

Land Value (if owned):

Enter 0 if land purchase is included in project cost

Construction Loan Term:

Typically 6-18 months

Loan Details

Construction Loan Interest Rate:

Draw Schedule:

Loan Fees & Points:

Origination fees, points, and other lender charges

Contingency Reserve:

Additional funds reserved for unexpected costs

Permanent Mortgage

Mortgage Interest Rate:

Mortgage Term:

Advanced Options

Include loan fees in construction loan

Include interest reserve in loan

Show permanent mortgage amortization

Show draw schedule details

Construction Loan Results

Total Construction Loan Amount

$320,000

Based on project cost and down payment

Construction Loan Balance Over Time

Construction Draw Schedule

Draw #	Month	Amount	Cumulative	Interest	Balance

Construction Phase Summary

Permanent Mortgage Details

Amortization Schedule (First 5 Years)

Year	Beginning Balance	Annual Principal	Annual Interest	Ending Balance

Understanding Construction Loans

Construction loans are short-term financing options designed specifically for building a new home or undertaking major renovations. They differ from traditional mortgages in several important ways.

Key Characteristics of Construction Loans

Draw Schedule: Funds are released in stages (draws) as construction progresses, rather than in a lump sum
Interest-Only Payments: During construction, you typically only pay interest on the amount drawn, not the full loan amount
Higher Interest Rates: Construction loans generally have higher rates than permanent mortgages due to increased risk
Shorter Terms: Usually 6-18 months, covering only the construction period
Inspection Requirements: Lenders typically require inspections before releasing additional funds

Construction-to-Permanent Loans

Many borrowers opt for construction-to-permanent loans (also called "one-time close" loans), which convert to a traditional mortgage once construction is complete. This option:

Reduces closing costs by combining two loans into one
Locks in your permanent mortgage rate before construction begins
Simplifies the transition from construction to permanent financing
Typically requires only one set of closing costs and fees

Cost Considerations

Contingency Reserve: Most lenders require a contingency reserve (typically 5-10% of project costs) to cover unexpected expenses
Interest Reserve: Some loans include an interest reserve to cover interest payments during construction
Down Payment: Construction loans often require larger down payments (20-25%) than traditional mortgages
Land Value: If you already own your land, its equity can often be used toward your down payment

Disclaimer: This calculator provides estimates based on the information you provide and standard financing assumptions. Actual loan terms, interest rates, fees, and draw schedules may vary based on lender policies, your credit profile, and specific project details. This tool is for informational purposes only and should not be considered as financial advice. Always consult with a qualified lender or financial advisor before making decisions about construction financing.

Monthly Mortgage Payment Formula:
$ P = L \times \frac{c(1 + c)^n}{(1 + c)^n - 1} $
Where:

P = Monthly payment
L = Loan amount
c = Monthly interest rate
n = Total number of monthly payments

What Is the Construction Loan Calculator?

The Construction Loan Calculator is a practical tool that estimates the total cost of building a new home or completing a major renovation. It evaluates construction-phase financing and the transition to a permanent mortgage, helping users understand monthly mortgage costs, interest expenses, and funding needs.

This tool functions as a home financing planner and mortgage cost planner, simplifying how users approach financing a house project from start to finish.

Key Features

Estimates construction loan amount based on project cost and down payment
Calculates monthly interest-only payments during construction
Supports various draw schedules and custom draw setups
Includes loan fees, contingency reserves, and optional interest reserves
Converts construction loan into a permanent mortgage and shows amortization
Provides visual charts and detailed tables for easy understanding

How to Use the Calculator

Follow these steps to get detailed construction loan and mortgage estimates:

Enter the total project cost, including land, permits, and materials.
Specify your down payment and land value if already owned.
Choose a loan term (in months) and construction interest rate.
Select a draw schedule that reflects how funds will be disbursed over time.
Add fees and contingency reserves if applicable.
Provide mortgage rate and term for the permanent financing phase.
Click "Calculate Construction Loan" to view your results.

How It Helps You

This tool acts as a house financing guide and loan affordability guide by showing the Financial path from breaking ground to long-term mortgage. It helps answer questions like:

How much will my construction loan be?
What are my monthly interest payments during the build?
What will my mortgage look like once the house is done?

You’ll get insights into your borrowing capacity, including a breakdown of principal and interest, so you can make informed choices. With clear amortization tables and draw schedules, it’s also a reliable loan amortization and monthly mortgage planner.

Frequently Asked Questions (FAQ)

What is a construction loan?

A construction loan is short-term financing that covers the cost of building a home. Funds are released in stages as construction progresses.

How are interest payments calculated?

You typically pay interest only on the amount drawn, not the full loan amount. This calculator estimates those payments month by month.

What is a draw schedule?

A draw schedule outlines when loan funds are released during the construction process. Options include standard (5 draws), accelerated, delayed, or custom plans.

Can I include loan fees in the loan?

Yes. You can choose to include loan fees and interest reserves as part of your loan amount using the advanced options.

What happens after construction ends?

The construction loan typically converts into a permanent mortgage. The calculator shows your monthly mortgage payment and a 5-year amortization schedule to help with long-term planning.

Who Should Use This Tool?

Anyone planning to build a home or Finance a major renovation can benefit from this calculator, including:

First-time homebuilders
Real estate investors
Property developers
Homeowners considering a rebuild or large remodel

It works well in combination with Other tools like a mortgage payment tool, loan Interest Calculator, and home loan estimate tools to build a full financial picture.

Final Thoughts

Understanding your total financing needs from ground-breaking to mortgage payoff is crucial. This Construction Loan Calculator helps you plan with clarity—showing your loan payoff schedule, interest charges, and mortgage details in one place.

Whether you're comparing financing options or checking how much you can afford, it serves as both a mortgage breakdown and a home financing guide that brings together construction planning and long-term affordability.