Estimate what a construction loan costs while your home or project is being built. Choose a draw schedule, and the calculator works out the interest-only payment each month on the money drawn so far, the total construction interest and the payment once the loan converts to a permanent mortgage.
Last updated:
Construction phase
$
%
months
Should total 100%. Fewer entries than months = no draws in the remaining months.
Permanent loan
%
Enter your values to see the result.
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How to use the Construction Loan Calculator
Enter the loan amount, construction interest rate and build time in months.
Choose a draw schedule or enter your builder's own percentages per month.
Enter the permanent loan rate and term the loan converts to after construction.
Press Calculate to see the monthly interest payments, total construction interest and the permanent payment.
How construction loan interest is calculated
Drawn balance after month m = sum of all draws up to month m
Interest payment in month m = drawn balance × annual rate ÷ 12
Total construction interest = sum of the monthly interest payments
Permanent payment = P × r ÷ (1 − (1 + r)−n), with r = permanent rate ÷ 12 and n = months in the term
With the mid-month option the draw made that month is counted for half the month, which approximates draws paid on different days. Example: a $400,000 loan at 8.5% drawn evenly over 12 months has a final payment of $2,833.33 and about $18,417 of total construction interest, compared with $34,000 if all the money were drawn on day one.
Interest-only payment by amount drawn
Drawn balance
7%
8%
9%
10%
$100,000
$583
$667
$750
$833
$200,000
$1,167
$1,333
$1,500
$1,667
$300,000
$1,750
$2,000
$2,250
$2,500
$400,000
$2,333
$2,667
$3,000
$3,333
$500,000
$2,917
$3,333
$3,750
$4,167
Monthly interest per drawn balance. Payments rise as each draw is released, so early months cost far less than the final ones.
Frequently asked questions
How does interest work on a construction loan?
The lender releases money in draws as work is completed, and you usually pay interest only on the amount drawn so far. Payments start small and grow as the balance rises, peaking when the loan is fully drawn.
How is the monthly construction payment calculated?
Interest payment = drawn balance × annual rate ÷ 12. With $200,000 drawn at 8.5%, the payment is $200,000 × 0.085 ÷ 12 = $1,416.67 for that month.
What is a draw schedule?
It is the plan for when the lender pays the builder, usually tied to milestones such as foundation, framing, roofing, mechanicals and finishes. Many projects follow an S-curve: small draws at first, larger ones mid-build and smaller ones at the end.
What happens when construction ends?
With a construction-to-permanent loan, the balance converts to a regular amortizing mortgage, and you start paying principal and interest. With a construction-only loan, you pay it off with a separate mortgage or other funds.
Can construction interest be added to the loan?
Some lenders set up an interest reserve or let you capitalize the interest so it is paid from the loan itself. That reduces cash needed during the build but increases the amount you repay. Tick the roll-in option to see its effect.
Does this include fees and closing costs?
No. Construction loans often carry origination fees, inspection or draw fees and title updates. Ask your lender for a loan estimate and add those costs separately.
Are all the tools on FreeToolCabin tested for quality and accuracy?
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