BuildCalc

Construction Loan Calculator

Building a home? Estimate your construction-phase and permanent loan payments.

Loan amount

Interest rate (APR)

Loan term: 5 years

What you entered

Loan amount: $25,000Interest rate: 7.5% APRTerm: 5 years

1
Convert the annual rate to a monthly rate
r = 7.5% ÷ 12= 0.6250%
2
Total number of monthly payments
n = 5 years × 12= 60 payments
3
Apply the amortizing-loan formula
M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1]= $500.95/mo
4
Total paid over the full term
$500.95 × 60 payments= $30,056.92
5
Total interest paid
$30,056.92 − $25,000.00 principal= $5,056.92

Result

Monthly payment: $500.95

Over 5 years you'll pay $5,057 in interest on top of the $25,000 you borrowed — $30,057 total.

Construction loan payment once converted at 7.5%

Construction loans usually run interest-only during the build, then convert to a normal amortising mortgage. Each row is the payment after conversion at 7.5%, which is where the long-term cost sits.

Loan amount	15-year payment	20-year payment	30-year payment	Total interest over 30 years
$200,000	$1,854.02	$1,611.19	$1,398.43	$303,434
$300,000	$2,781.04	$2,416.78	$2,097.64	$455,152
$400,000	$3,708.05	$3,222.37	$2,796.86	$606,869
$500,000	$4,635.06	$4,027.97	$3,496.07	$758,586
$750,000	$6,952.59	$6,041.95	$5,244.11	$1,137,879

The payments above are for the permanent loan after conversion, not the build phase. During construction, funds are released in stages against completed work - the draw schedule - and you pay interest only on what has actually been drawn, so early payments are small and rise as the build progresses. Rates typically sit above a standard mortgage because an unfinished building is weaker collateral, and lenders often require a larger deposit, detailed plans and a fixed-price builder contract. A construction-to-permanent loan converts automatically with one set of closing costs; a standalone construction loan must be refinanced at the end, exposing you to whatever rates are available then. Cost overruns are the usual failure point, so budget contingency above the contract price.

How construction loans work

Construction loans are short-term (6–18 months) loans that fund home building. You typically pay interest-only on drawn amounts during construction. Once the home is complete, the loan converts to a permanent mortgage (construction-to-permanent) or you refinance into a new mortgage. Rates are usually 1–2% higher than conventional mortgages.

Construction loan vs regular mortgage

Unlike a regular mortgage where you get the full amount upfront, construction loans disburse in draws as work is completed. Lenders require detailed plans, budgets, and inspections. Down payments are typically 20–25%. The interest-only phase keeps payments low during construction.

Frequently asked questions

How do construction loan payments work?

During construction (6–18 months), you pay interest only on the amount drawn. If your $300,000 loan has $100,000 drawn at 8%, your monthly payment is $667. As more draws happen, payments increase. After construction, it converts to a standard mortgage with full principal + interest payments.

How much down payment for a construction loan?

Typically 20–25% of the total project cost (land + construction). Some lenders accept 10–15% with strong credit and income. If you already own the land, its equity can count toward the down payment. Land value of $80K on a $400K project = 20% already covered.

One-time close vs two-time close construction loan?

One-time close: single loan covers construction and permanent mortgage, one set of closing costs, rate locked at start. Two-time close: separate construction loan and permanent mortgage, two sets of closing costs, but you can shop for better permanent rates later. One-time close is simpler and usually cheaper overall.