{
  "id": "construction-loan",
  "version": "a3fb54db2c24",
  "status": "published",
  "name": "Construction Loan Calculator",
  "question": "What will my construction loan cost?",
  "summary": "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.",
  "category": "finance",
  "subcategory": "mortgage-and-real-estate",
  "url": "https://www.acalculator.org/finance/construction-loan-calculator",
  "markdown": "https://www.acalculator.org/finance/construction-loan-calculator.md",
  "kind": "schedule",
  "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.",
  "assumptions": [
    "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."
  ],
  "inputs": {
    "$schema": "https://json-schema.org/draft/2020-12/schema",
    "type": "object",
    "properties": {
      "amount": {
        "title": "Construction loan amount",
        "description": "The whole amount the lender will pay out over the build.",
        "type": "number",
        "x-unit": "USD",
        "exclusiveMinimum": 0,
        "maximum": 100000000
      },
      "months": {
        "title": "Build time (months)",
        "description": "How many months the build takes; the loan is paid out in equal draws, one at the start of each month.",
        "type": "integer",
        "minimum": 1,
        "maximum": 36
      },
      "initial": {
        "title": "Drawn at closing",
        "description": "Money paid out when the loan closes, for example to buy the land; the rest is drawn over the build.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 100000000
      },
      "rate": {
        "title": "Construction interest rate",
        "description": "The yearly rate during the build. The monthly rate is this ÷ 12.",
        "type": "number",
        "x-unit": "percent",
        "minimum": 0,
        "maximum": 30
      },
      "permrate": {
        "title": "Permanent loan rate",
        "description": "The fixed yearly rate of the loan that repays the construction loan when the build ends.",
        "type": "number",
        "x-unit": "percent",
        "minimum": 0,
        "maximum": 30
      },
      "permyears": {
        "title": "Permanent loan term (years)",
        "description": "The years of the permanent loan; 0 when the whole loan is repaid when the build ends.",
        "type": "integer",
        "minimum": 0,
        "maximum": 40
      },
      "start": {
        "title": "Loan start date",
        "description": "The day the loan starts. The first payment is one month later.",
        "type": "string",
        "format": "date"
      }
    }
  },
  "outputs": {
    "fullPayment": {
      "label": "Interest-only payment when fully drawn",
      "description": "The payment in the last build month, when the whole loan is out: the loan × the rate ÷ 12.",
      "format": "money"
    },
    "firstPayment": {
      "label": "First interest-only payment",
      "description": "The payment in the first build month, on the closing draw and the first monthly draw.",
      "format": "money"
    },
    "draw": {
      "label": "Monthly draw",
      "description": "The money paid out at the start of each build month.",
      "format": "money"
    },
    "buildInterest": {
      "label": "Interest during construction",
      "description": "All the interest paid in the build months.",
      "format": "money"
    },
    "permPayment": {
      "label": "Permanent loan payment",
      "description": "The level monthly payment that repays the whole loan over the permanent term.",
      "format": "money"
    },
    "permInterest": {
      "label": "Permanent loan interest",
      "description": "All the interest on the permanent loan.",
      "format": "money"
    },
    "interest": {
      "label": "Total interest",
      "description": "The interest during construction plus the interest on the permanent loan.",
      "format": "money"
    },
    "payoff": {
      "label": "Last payment",
      "description": "The month of the last payment, when a start date is given.",
      "format": "month-year"
    }
  },
  "defaultAnswer": {
    "inputs": {
      "amount": 400000,
      "months": 12,
      "initial": 0,
      "rate": 8.5,
      "permrate": 7,
      "permyears": 30,
      "start": "2026-09-30"
    },
    "outputs": {
      "fullPayment": 2833.333333333333,
      "firstPayment": 236.11111111111111,
      "draw": 33333.333333333336,
      "buildInterest": 18416.666666666664,
      "permPayment": 2661.209980716733,
      "permInterest": 558035.5930580238,
      "interest": 576452.2597246905,
      "payoff": "2057-09-30"
    },
    "text": "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."
  },
  "examples": [
    {
      "given": {
        "amount": 400000,
        "months": 12,
        "initial": 0,
        "rate": 8.5,
        "permrate": 7,
        "permyears": 30
      },
      "expect": {
        "draw": 33333.333333333336,
        "firstPayment": 236.11111111111111,
        "fullPayment": 2833.333333333333,
        "buildInterest": 18416.666666666664,
        "permPayment": 2661.2099807167297,
        "interest": 576452.2597246893
      },
      "source": "hand calculation in content.mdx; Python 3 in docs/progress/WP-49/python/construction.py; 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/"
    },
    {
      "given": {
        "amount": 300000,
        "months": 9,
        "initial": 75000,
        "rate": 9,
        "permrate": 6.5,
        "permyears": 15
      },
      "expect": {
        "draw": 25000,
        "firstPayment": 750,
        "fullPayment": 2250,
        "buildInterest": 13500,
        "permPayment": 2613.3220958920965
      },
      "source": "hand calculation in content.mdx: 0.0075 × (9 × 75,000 + 25,000 × 45); 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/"
    },
    {
      "given": {
        "amount": 250000,
        "months": 6,
        "initial": 0,
        "rate": 12,
        "permrate": 7,
        "permyears": 0,
        "start": "2026-11-01"
      },
      "expect": {
        "buildInterest": 8750,
        "interest": 8750,
        "payoff": "2027-05-01"
      },
      "source": "hand calculation in content.mdx: 0.01 × 250,000 ÷ 6 × 21; the balance is due in month 6; 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/"
    }
  ],
  "sources": [
    "Consumer Financial Protection Bureau, What is a construction loan? https://www.consumerfinance.gov/ask-cfpb/what-is-a-construction-loan-en-108/",
    "Regulation Z, 12 CFR 1026.17(c)(6)(ii) and appendix D, Multiple advance construction loans (interest on the amount advanced). https://www.consumerfinance.gov/rules-policy/regulations/1026/d/",
    "Amortized loan payment formula: S. A. Broverman, Mathematics of Investment and Credit, chapter 3."
  ],
  "related": [
    "mortgage",
    "home-equity-loan",
    "amortization",
    "interest-only-loan"
  ],
  "changelog": []
}