A construction loan calculator shows your interest-only payments at each draw phase, total interest paid during construction, and what your permanent mortgage payment will be after completion.
Loan Details
Draw Schedule (% of total at each phase)
How to Calculate Construction Loan Costs
This construction loan calculator shows your interest costs at each phase and helps you understand the full cost of building. Understanding the draw schedule is key to budgeting accurately.
Interest Is Only on the Outstanding Balance
The key advantage of construction loans: you only pay interest on what has been drawn. If you have a $500,000 loan but only $100,000 drawn for the foundation, you pay interest on $100,000 only. As more phases are funded, the balance increases and so do your payments.
Planning for Payment Shock
When construction completes and the loan converts to a permanent mortgage, your payment will jump significantly from interest-only to full principal and interest. On a $500,000 loan at 7.5%, the interest-only payment during early phases might be $600/month, while the permanent mortgage payment will be $3,500/month. Plan your budget for this transition.
FAQ
Is this construction loan calculator free?
Yes, completely free with no signup required. All calculations run in your browser.
How does a construction loan work?
A construction loan is a short-term loan that funds building a home or major renovation in stages called draws. You pay interest only on the amount drawn, not the full loan amount. As construction milestones are reached, the lender releases additional funds. Once construction is complete, the loan converts to a permanent mortgage.
What are typical construction loan interest rates?
Construction loans typically carry rates 0.5-1% higher than standard mortgages because they are higher risk. In 2025-2026 with rates around 6.5-7.5%, construction loans typically run 7-8.5%. The rate is often variable during construction, then locked when converting to a permanent mortgage.
What is a construction-to-permanent loan?
A construction-to-permanent (C2P) loan automatically converts to a mortgage when construction is complete — avoiding two separate closings and two sets of closing costs. You lock the permanent rate at the beginning. Some borrowers prefer separate loans to shop for the best permanent mortgage rate after construction.
What are typical construction draw phases?
Common draw phases are: foundation/excavation (10%), framing (20%), rough mechanicals/electrical/plumbing (15%), insulation/drywall (15%), exterior finishes/roofing (15%), interior finishes (15%), final completion (10%). Exact phases and percentages vary by lender and project type.
How long is a construction loan?
Most construction loans are for 12-18 months — enough time to complete most new construction projects. Extensions are available but may cost additional fees. Complex projects or custom builds may need 18-24 months. The loan converts to a permanent mortgage at completion.