Construction Loan Calculator

Calculate payments for a construction loan, which typically involves an interest-only period during construction followed by a standard principal and interest mortgage.

Loan & Project Details

Related Construction & Finance Calculators

Understanding Construction Loans

Construction loans are short-term loans used to finance the building of a home or other real estate project. Unlike a traditional mortgage where you receive the funds in one lump sum, construction loan funds are paid out in stages to the builder as work progresses. These stages are called "draws" and correspond to construction milestones (e.g., foundation complete, framing complete, etc.).

During the construction phase, borrowers typically make **interest-only payments**. The payment amount may increase as more money is drawn. Our calculator simplifies this by showing the interest-only payment on the full loan amount. Once construction is complete, the loan is often converted into a standard, long-term mortgage, and you begin making regular payments of both principal and interest (P&I).

How to Use the Construction Loan Calculator

  1. Loan Amount: Enter the total estimated cost of your construction project that you need to finance.
  2. Interest Rate: Input the annual interest rate for the loan. Rates for construction loans are often variable and slightly higher than standard mortgages.
  3. Construction Period: Enter the estimated number of months it will take to complete the construction.
  4. Mortgage Term: Enter the term (in years) of the standard mortgage that the loan will convert to after construction is finished.

Frequently Asked Questions (FAQ)

What is a construction-to-permanent loan?

This is the most common type of financing for new home construction. It's a single loan that covers both the construction phase and the permanent mortgage. It saves you from having to go through two separate loan application and closing processes, which can save time and money.

What is required to qualify for a construction loan?

Qualifying for a construction loan is often more difficult than for a standard mortgage. Lenders will typically require a larger down payment (often 20-25%), a good credit score, a detailed set of building plans, a project budget, and a contract with a licensed and reputable builder.