Construction Loan Calculator
Build the month-by-month draw schedule and see the interest-only payment for each month of the build and the payment after the loan converts.
Total financing cost is $6,000.00 in origination fees, $27,625.00 in construction interest, and $883,770.14 in permanent loan interest over 30 years.
| Month | Draw | Draw amount | Loan balance | Interest-only payment |
|---|---|---|---|---|
| 1 | 1.7% | $10,222.25 | $10,222.25 | $72.41 |
| 2 | 5% | $29,970.13 | $40,192.38 | $284.70 |
| 3 | 7.9% | $47,675.59 | $87,867.97 | $622.40 |
| 4 | 10.4% | $62,132.03 | $150,000.00 | $1,062.50 |
| 5 | 12.1% | $72,354.29 | $222,354.29 | $1,575.01 |
| 6 | 12.9% | $77,645.71 | $300,000.00 | $2,125.00 |
| 7 | 12.9% | $77,645.71 | $377,645.71 | $2,674.99 |
| 8 | 12.1% | $72,354.29 | $450,000.00 | $3,187.50 |
| 9 | 10.4% | $62,132.03 | $512,132.03 | $3,627.60 |
| 10 | 7.9% | $47,675.59 | $559,807.62 | $3,965.30 |
| 11 | 5% | $29,970.13 | $589,777.75 | $4,177.59 |
| 12 | 1.7% | $10,222.25 | $600,000.00 | $4,250.00 |
| Total | 100% | $600,000.00 | $27,625.00 |
Assumptions and sources
The calculator assumes each draw funds at the start of its month and the rates stay fixed. Your lender sets the actual draw schedule, rates, and fees.
- Construction rate 8.5%: the bank prime loan rate of 7.00% plus an example spread of 1.5 points. Source: Federal Reserve H.15 via FRED (DPRIME), as of Oct 21, 2026.
- Permanent rate 7.32%: the average 30-year fixed mortgage rate. Source: Freddie Mac Primary Mortgage Market Survey, as of Oct 22, 2026.
- Origination fee 1% and equity of 20% of cost (80% loan to cost). Source: Buildplus example values, not market data. Use the numbers on your Loan Estimate, as of Oct 27, 2026.
Use it with your client to plan the money for a custom home. Updated October 2026. Results are estimates, not financial, legal, lending, or tax advice. See all free contractor tools.
How construction loan interest works
A construction loan does not fund on day one. The lender releases money in draws as work is done, often after an inspection. You pay interest only on what has been drawn, so the payment starts small and grows with the home. Most builds draw slowly at the start, fastest during framing and rough-ins, and slowly again at finish. That is the S-curve.
The formula, with the default numbers
| 1 | Loan amountProject cost − equity | $750,000.00 − $150,000.00 =$600,000.00 |
|---|---|---|
| 2 | Interest in month 6Balance drawn so far × annual rate ÷ 12 | $300,000.00 × 8.5% ÷ 12 =$2,125.00 |
| 3 | Construction interestMonthly interest added up over the 12-month build | S-curve draws over 12 months =$27,625.00 |
| 4 | Monthly payment after conversionLoan × r ÷ (1 − (1 + r)^−n), where r is the monthly rate and n is the months | $600,000.00 at 7.32% over 360 months =$4,121.58 |
Construction-to-permanent loans
One loan, one closing. When the home is done, the balance converts to a mortgage with principal and interest payments. You pay one set of closing costs and can often lock the permanent rate up front.
Stand-alone construction loans
The construction loan is due when the build ends, and you take a separate mortgage to pay it off. You can shop for the mortgage rate then, but you close twice and pay two sets of fees.
When to use it
Use it before you sign a contract, to see the cash a client needs each month while they also pay rent or a current mortgage. Use it again when the lender sends the draw schedule: switch to Custom and type their percents. Builders can send the CSV with a bid, so the client sees the interest cost of each month the build runs. Each draw usually pays a pay application. For a spec home, carry the interest into the spec home pro forma. When a draw lands, Buildplus payments pays subs by RTP, ACH, check, or card from the project account.
Common mistakes
Interest on the full loan from day one. That overstates the build cost, because the balance is small for the first months.
No allowance for delay. Each extra month adds a month of interest on a loan that is close to fully drawn. Add two months to the build length to see the cost.
Fees left out. Origination fees, inspection fees for each draw, and title updates add to the cost. Your Loan Estimate lists them.
Before Buildplus I would have to send my subcontractors multiple payments spread out over a couple of days to avoid hitting electronic transfer limits.
Now I can send one payment and be done. That convenience combined with the fact that payments are automatically tracked back to the right subcontract makes Buildplus a very elegant solution.
Cliff Kahan
Property Projects LLCFAQs
How is interest calculated on a construction loan?
You pay interest only on the money drawn so far. If $300,000 of a $600,000 loan is drawn at an 8% rate, the monthly payment is $300,000 times 8% divided by 12, or $2,000. The payment grows with each draw until the home is done.
What is a construction-to-permanent loan?
It is one loan that covers the build and then converts to a mortgage. You close once, make interest-only payments during construction, and start principal and interest payments when the home is complete.
How much down payment does a construction loan need?
It depends on the lender and the loan program, so ask yours. Land you already own often counts toward the down payment, which is why this calculator treats land equity and cash the same way.
How does a construction loan draw schedule work?
The lender releases money at set milestones, such as foundation, framing, and dry-in. The builder requests a draw, the lender inspects the work, and then the lender pays the draw. Clear invoices with the costs attached make each draw easier to review.
Why does a construction loan cost more than a mortgage?
The lender carries more risk while the home is unfinished, so rates and fees are often higher. Interest-only payments keep the monthly cost low during the build, but every month of delay adds interest. A shorter build costs less interest.
Can I share or save my numbers?
Yes. The page address holds every number you enter, so the Share link button copies a link to the same result. Download CSV saves the draw schedule and the summary as shown on the page.
What is Buildplus?
Buildplus is the payments, expenses and invoicing platform built for contractors running cost-plus jobs. Every payment, swipe and reimbursable expense stays tied to the project it belongs to.
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