Construction Loan Calculator
During the build you pay interest only on the drawn balance; at completion the loan converts to a standard mortgage. See both the construction-phase and permanent payments.
Free to use No sign-up needed Updates as you type
How the construction loan calculator works
A construction loan funds the build in stages, and you pay interest only on the money actually drawn rather than the full approved amount. The calculator assumes draws ramp up gradually, averaging roughly half the loan balance across the project, to estimate your interest-only payment during construction.
When the build finishes, the loan converts to a standard permanent mortgage that amortizes principal and interest. The result shows the average interest-only payment while building, the total interest paid during construction, and the fully amortizing payment afterward.
Worked example: with loan amount of $400,000, construction rate of 8.00% and build period (months) of 9, the construction loan calculator shows permanent monthly payment of $2,709.74.
- Avg. construction payment
- $1,333.33
- Total construction interest
- $12,000
- Permanent payment
- $2,709.74
- Permanent total interest
- $575,506
| Loan amount | Permanent monthly payment |
|---|---|
| $250,000 | $1,693.59 |
| $400,000 | $2,709.74 |
| $600,000 | $4,064.61 |
| $900,000 | $6,096.91 |
The formula
Construction interest applies the monthly rate to the average drawn balance, taken as about half the loan, across the build's duration. The permanent payment then uses the standard amortization formula, Payment = P × r ÷ (1 − (1 + r)^−n), on the full loan amount at the permanent rate and term once construction ends.
How every calculator here computes, what it assumes and how the defaults stay current: our methodology.
- The average drawn balance is assumed near fifty percent of the loan; a faster or slower draw schedule shifts construction interest.
- Construction-phase interest is paid monthly out of pocket rather than capitalized into the permanent loan balance.
- The construction and permanent rates may differ; a single combined rate would misstate one phase or the other.
- The build finishes on schedule, since overruns extend the interest-only period and raise total construction interest.
- Lot purchase, inspection fees, and contingency reserves are excluded, though many construction budgets must fund them.
Results are estimates for educational purposes and are not financial advice. Confirm exact figures with your lender or a licensed advisor.
Questions about the construction loan calculator
Why do I pay interest only on part of the loan during the build?
Funds are released in draws as work is completed, not handed over at once. You owe interest only on what has actually been disbursed, so early payments are small and grow as more is drawn.
Averaging the drawn balance near half the loan reflects this ramp, giving a realistic estimate rather than charging interest on idle, undisbursed funds.
What is the difference between a construction-to-permanent and a stand-alone loan?
A construction-to-permanent loan converts automatically into your mortgage when building ends, closing once and saving a second set of fees.
A stand-alone construction loan covers only the build and must be paid off by a separate mortgage you arrange afterward, meaning two closings and the risk that rates move against you before the second loan locks.
What happens to my payment when construction is finished?
It rises, usually noticeably. Interest-only payments during the build cover financing costs alone, but once the loan converts to a permanent mortgage you begin repaying principal as well across the full term.
The calculator shows both figures side by side so the jump from the construction payment to the amortizing payment is clear before you commit.
Is my information saved or shared?
No. Every calculation runs entirely in your browser. We never store, transmit or sell the numbers you enter.
How does a construction loan work?
During building you draw funds in stages and pay interest only on the amount drawn, so payments start small and grow as the project progresses. When construction finishes, the loan usually converts to — or is refinanced into — a standard mortgage.
Sources
How the figures on this site are calculated and tested: methodology · editorial policy.
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