Construction Loan Calculator

Complete Guide: Construction Loan Calculator

Use our construction loan calculator to estimate interest‑only draws and the permanent loan payment. Enter budget, draw schedule, rate, and term with charts.

What is a construction loan?

A construction loan is a short-term, interest-only loan used to fund a custom build or major renovation. Instead of receiving all funds upfront, your lender releases money in draws as work is completed. Because only the drawn amount accrues interest, your monthly interest costs ramp up as the project advances. After completion, most borrowers either convert to a standard mortgage via a single-close construction-to-permanent structure or refinance into a permanent loan with a second closing.

How the calculator models costs

• Draw mechanics: Choose even monthly draws or enter a typical staged pattern (e.g., foundation, framing, rough-in, finishes, completion). We assume draws occur mid-month for interest approximation.
• Interest-only during build: Interest accrues only on funds already disbursed. Your balance grows with each draw.
• Permanent mortgage preview: Once the build is complete, we estimate the principal & interest payment on your long-term mortgage.
• Fees: Add per-draw and other one-time construction fees to better reflect total cost.

Single-close vs two-close

With a construction-to-permanent (C2P) loan, you close once. The loan funds the build and then converts to a standard amortizing mortgage when the home is finished. A two-close approach uses a separate construction loan and permanent mortgage. C2P can simplify process and reduce duplicate closing costs, while a two-close loan can allow you to shop rates for the permanent mortgage later. Your best option depends on rate environment, lender fees, and your tolerance for process complexity.

Typical draw schedules

Every lender is different, but common stage-based structures include:

• Foundation & site work: 10%–20%
• Framing & shell: 20%–30%
• Rough-in (MEP): 20%–30%
• Interior finishes: 20%–30%
• Punch list & completion: 10%–15%

Our staged mode lets you customize these percentages and spreads them evenly across your construction timeline for clear month-by-month interest.

Example

Suppose your project cost is $600,000 with 20% down (loan amount $480,000). With a 10‑month build and 8.5% APR, even monthly draws approximate the following: interest starts low, then peaks near the end of the project as the drawn balance approaches the full loan amount. If your permanent mortgage APR is 6.75% for 30 years, the estimated P&I payment is shown so you can gauge affordability post‑completion.

What drives construction interest cost?

• Timeline: Longer builds accrue more interest.
• APR: Higher construction APR directly increases monthly interest.
• Draw shape: Front‑loaded draws raise early balances; staged draws that come later reduce early interest.
• Delays: Schedule slips extend interest‑only months and may trigger extra inspections/fees.

Ways to lower the total cost

• Negotiate draw inspection fees or bundle where possible.
• Keep the build on schedule; delays compound interest and soft costs.
• Right‑size the contingency; unused funds do not accrue interest.
• Compare C2P vs two‑close for total fees and rate risk.

Interpreting your results

Use Total Construction Interest to plan cash needs during the build and compare lender options. The Max Monthly Interest helps you budget peak payments as the project nears completion. The Permanent Mortgage Payment preview shows post‑construction affordability. Export the full schedule to share with your builder or lender.