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Construction Loan Calculator

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Enter your construction loan amount, interest rate, and build period to find your interest-only payments during construction.

Construction Loan Calculator

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Monthly interest-only payment
$1,750.00
Total interest during build
$21,000.00
Assumes the full loan amount is drawn immediately - many construction loans disburse in stages, which would lower actual interest during early months.

The formula

Monthly interest-only payment = Loan amount x (Annual rate / 12) Total interest during build = Monthly payment x Build period (months)
Example

A $300,000 construction loan at 7% for a 12-month build: monthly payment = 300,000 x (0.07/12) = $1,750, totaling $21,000 in interest before the permanent mortgage begins.

Step-by-step guide

  1. Enter your total construction loan amount.
  2. Enter the interest rate and expected build period in months.
  3. Read your monthly interest-only payment and total interest paid during construction.

Why construction loans work differently from a regular mortgage

A standard mortgage is a single lump sum you start repaying (principal and interest) from day one. A construction loan instead typically works in two phases: during the build, you usually pay interest-only on funds that have been drawn so far (this calculator's focus), then the loan converts - either automatically or through refinancing - into a standard amortizing mortgage once construction finishes. This structure exists because you're paying for a home that doesn't exist yet in its final form, so lenders disburse funds in stages tied to construction milestones rather than all at once.

Common mistakes

Assuming the full loan amount accrues interest from day one - many construction loans disburse in draws tied to build progress, so actual interest in the early months is often lower than this full-amount estimate.
Forgetting to budget for the transition into a permanent mortgage after construction ends - this calculator covers the build phase only, not the ongoing mortgage payment afterward.

Frequently asked questions

What happens after construction finishes?

Most construction loans convert into a standard permanent mortgage at that point - sometimes automatically as a "construction-to-permanent" loan, or sometimes requiring a separate refinance into a new mortgage.

Why do rates on construction loans tend to run higher than regular mortgages?

Construction loans are considered higher-risk by lenders, since there's no finished, appraisable property securing the loan yet - this added risk is often reflected in a somewhat higher interest rate compared to a standard mortgage.

Do I make payments during construction even though the house isn't finished?

Yes - typically interest-only payments on the amount drawn so far, which is exactly what this calculator estimates, rather than full principal-and-interest payments.

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