acalculator

What will my construction loan cost?

See what you pay each month while your home is built and the loan is paid out in draws, what the build costs in interest, and the payment once it becomes a regular mortgage.

Your numbers

An example rate, not today’s rate. Use the rate your lender quotes.
An example rate, not today’s rate. Use the rate your lender quotes.
Interest-only payment when fully drawn
$2,833.33

A $400,000.00 construction loan drawn over 12 months at 8.5% costs $18,416.67 in interest during the build, and $2,833.33 a month once fully drawn.

First interest-only payment
$236.11
Monthly draw
$33,333.33
Interest during construction
$18,416.67
Permanent loan payment
$2,661.21
Permanent loan interest
$558,035.59
Total interest
$576,452.26
Last payment
September 2057
Months
372

Answer for the example date Wednesday, September 30, 2026. It changes to today's date when the page loads.

Interest-only payment when fully drawn: $2,833.33. A $400,000.00 construction loan drawn over 12 months at 8.5% costs $18,416.67 in interest during the build, and $2,833.33 a month once fully drawn.

How does the balance build up and come down?

Where does each year of payments go?

What does every month look like?

The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use

How to calculate

Computes the interest-only payments while a home is built and the loan is drawn month by month, the interest during construction, and the payment on the permanent loan afterwards.

Example with the default inputs (Construction loan amount $400,000.00, Build time (months) 12, Drawn at closing $0.00, Construction interest rate 8.5%, Permanent loan rate 7%, Permanent loan term (years) 30, Loan start date September 30, 2026) on the example date Wednesday, September 30, 2026: A $400,000.00 construction loan drawn over 12 months at 8.5% costs $18,416.67 in interest during the build, and $2,833.33 a month once fully drawn.

Method: draw = (L − D₀) ÷ m; build interest = r × (m × D₀ + draw × m(m + 1) ÷ 2), with r = rate ÷ 1200; permanent payment = L × p ÷ (1 − (1 + p)^−N), with p = permanent rate ÷ 1200 and N its months.

  • The loan is paid out in equal draws at the start of each build month, after any amount drawn at closing.
  • During the build you pay only the interest, at the end of each month, on everything drawn so far.
  • When the build ends, a fixed-rate permanent loan repays the whole amount, or the balance is due at once.
  • Fees, interest reserves, and closing costs are not included.
  • Values are not rounded to the cent between months; only the display is rounded.

Machine-readable copies: Markdown, JSON.

Worked examples

Each example is checked against the calculator on every build.

  1. Construction loan amount $400,000.00, Build time (months) 12, Drawn at closing $0.00, Construction interest rate 8.5%, Permanent loan rate 7%, Permanent loan term (years) 30 gives Monthly draw $33,333.33, First interest-only payment $236.11, Interest-only payment when fully drawn $2,833.33, Interest during construction $18,416.67, Permanent loan payment $2,661.21, Total interest $576,452.26.Source: Regulation Z, 12 CFR 1026 appendix D, multiple advance construction loans (interest on the amount advanced). https://www.consumerfinance.gov/rules-policy/regulations/1026/d/
  2. Construction loan amount $300,000.00, Build time (months) 9, Drawn at closing $75,000.00, Construction interest rate 9%, Permanent loan rate 6.5%, Permanent loan term (years) 15 gives Monthly draw $25,000.00, First interest-only payment $750.00, Interest-only payment when fully drawn $2,250.00, Interest during construction $13,500.00, Permanent loan payment $2,613.32.Source: Regulation Z, 12 CFR 1026 appendix D, multiple advance construction loans (interest on the amount advanced). https://www.consumerfinance.gov/rules-policy/regulations/1026/d/
  3. Construction loan amount $250,000.00, Build time (months) 6, Drawn at closing $0.00, Construction interest rate 12%, Permanent loan rate 7%, Permanent loan term (years) 0, Loan start date 2026-11-01 gives Interest during construction $8,750.00, Total interest $8,750.00, Last payment 2027-05-01.Source: Regulation Z, 12 CFR 1026 appendix D, multiple advance construction loans (interest on the amount advanced). https://www.consumerfinance.gov/rules-policy/regulations/1026/d/

How it works

Write L for the construction loan amount, D₀ for the amount drawn at closing (0 when left empty; it may not be more than L), m for the build months, r for the monthly construction rate (the yearly rate in percent ÷ 1200), p for the monthly permanent rate, and N for the permanent term in months (years × 12).

  1. Draws: D₀ is paid out at the start of month 1. The rest, L − D₀, is paid out in m equal draws, one at the start of each build month: draw = (L − D₀) ÷ m.
  2. Interest during the build: in build month k (1 to m), the amount drawn is D₀ + k × draw, and you pay interest on it at the end of the month: (D₀ + k × draw) × r. Nothing is repaid during the build. The first payment is (D₀ + draw) × r and the payment when fully drawn (month m) is L × r.
  3. Interest during construction: the sum of those payments: r × (m × D₀ + draw × m × (m + 1) ÷ 2).
  4. Permanent loan: when N is more than 0, a fixed-rate loan of L starts after month m: payment = L × p ÷ (1 − (1 + p)^−N) (at 0%, L ÷ N). Each month interest = balance × p; the last payment pays what is left. Its interest is N × payment − L.
  5. No permanent loan: when the permanent term is 0 years, the whole balance L is repaid with the interest at the end of month m.
  6. Total interest: the interest during construction plus the permanent loan's interest.
  7. Dates: with a start date, month 1's payment is one month after it; the last payment is m + N months after it.

Assumptions

  • Draws are equal and paid at the start of each build month; interest is paid at the end of each month.
  • The construction rate is fixed during the build, and the permanent rate is fixed for its whole term.
  • Fees, closing costs, interest reserves, and inspection fees are not included.
  • Values are not rounded to the cent between months; only the display is rounded.
  • The default rates are examples, not live rates.

Worked examples by hand

$400,000 drawn over 12 months at 8.5%, then 30 years at 7%. The draw is 400,000 ÷ 12 = $33,333.33 a month and r = 0.085 ÷ 12 = 0.0070833. The first payment is 33,333.33 × 0.0070833 = $236.11 and the payment when fully drawn is 400,000 × 0.0070833 = $2,833.33. Interest during construction is 0.0070833 × 33,333.33 × 12 × 13 ÷ 2 = $18,416.67. The permanent loan: p = 0.07 ÷ 12 and (1 + p)^−360 = 0.123206, so the payment is 400,000 × 0.0058333 ÷ (1 − 0.123206) = $2,661.21; its interest is 360 × 2,661.21 − 400,000 = $558,035.59, so the total interest is $576,452.26.

$300,000 over 9 months at 9%, with $75,000 drawn at closing for the land, then 15 years at 6.5%. The draw is (300,000 − 75,000) ÷ 9 = $25,000, and r = 0.0075. The first payment is (75,000 + 25,000) × 0.0075 = $750 and the payment when fully drawn is 300,000 × 0.0075 = $2,250. Interest during construction is 0.0075 × (9 × 75,000 + 25,000 × 9 × 10 ÷ 2) = 0.0075 × 1,800,000 = $13,500. The permanent payment is 300,000 × 0.0054167 ÷ (1 − 0.378186) = $2,613.32.

$250,000 over 6 months at 12%, repaid when the build ends, starting November 1, 2026. The draw is $41,666.67 and r = 0.01, so the interest is 0.01 × 41,666.67 × 6 × 7 ÷ 2 = $8,750, the total interest too. The $250,000 is repaid with the last interest payment in May 2027.

Other questions people ask

How do construction loan payments work?

The lender pays the builder in stages (draws) as work is done. Until the build ends you usually pay only the interest on the money drawn so far, so the payment starts small and grows with each draw. When the home is finished, the loan is repaid or turned into a regular mortgage.

How is the interest during construction calculated?

Each month the interest is the amount drawn so far × the yearly rate ÷ 12. With equal draws at the start of each month, the total is r × draw × m(m + 1) ÷ 2, where m is the number of months. $400,000 drawn over 12 months at 8.5% costs $18,416.67 in interest during the build.

What is a construction-to-permanent loan?

One loan that pays for the build and then becomes a fixed-rate mortgage, with one closing. This page shows it as interest-only months during the build, then a level payment over the permanent term. With a separate construction loan you pay it off at the end of the build, often with a new mortgage; enter a permanent term of 0 years to see that.

Why is the payment highest at the end of the build?

Because by then the whole loan has been paid out, so the interest is on the full amount: the loan × the rate ÷ 12. For $400,000 at 8.5% that is $2,833.33 a month.

What does “drawn at closing” mean?

Money the lender pays out on the first day, often to buy the land or pay off a lot loan. You pay interest on it from the first month; the rest of the loan is drawn in equal parts over the build.

Do real draws come in equal monthly amounts?

Not usually. Draws follow the builder’s schedule and inspections, so some months draw more. Equal draws give a fair estimate of the interest; your lender’s draw schedule gives the exact figure.