Construction Loan Calculator
See the interest-only payment while you build and the mortgage payment once the loan converts.
Two phases, two payments
Interest-only while you build, then a normal amortizing mortgage once the home is finished.
Payments rise as you draw
Interest is charged on the funds released so far, so the draw-period payment grows as construction progresses.
What is a construction loan?
Financing a build, then a mortgage
A construction loan is short-term financing that pays for building a home, released in stages called draws as work is completed. During the build you pay interest only on the money drawn so far. A construction-to-permanent loan then converts to a standard mortgage once the home is finished, so you make regular principal-and-interest payments. As consumer-finance resources such as the CFPB explain, this structure matches the cost of money to the progress of the project rather than handing over a lump sum up front.
The calculator estimates the peak draw-period payment and the permanent mortgage payment from the same loan amount and rate.
interest-only = balance × monthly rate; permanent = standard amortization over the termDuring construction, the monthly interest-only payment is the outstanding balance times the monthly rate (the annual rate divided by twelve). Because funds are released gradually, your payment starts small and rises toward the full interest-only amount as the home nears completion — the figure shown is that peak, when the loan is fully drawn. The calculator also estimates the total interest over the build using the average balance, roughly half the loan if funds are drawn steadily. Once construction ends, the loan amortizes over the permanent term, giving the regular monthly principal-and-interest payment.
You borrow 300,000 to build, at a 7.5% rate, with a 12-month construction period and a 30-year permanent term.
Find the monthly rate
7.5% ÷ 12 = 0.625% per month.Peak interest-only payment
300,000 × 0.625% = 1,875 per month once fully drawn.Total construction interest
Using the average balance over 12 months: 1,875 × 12 × 0.5 ≈ 11,250.Permanent payment
Amortizing 300,000 over 30 years at 7.5% gives about 2,098 per month.
The two-phase structure changes how and when you pay, and it pays to understand each lever.
Interest-only is cheaper monthly
During the build you pay only interest, so payments are lower than a full mortgage — but you build no equity yet.
A longer build costs more
Every extra month of construction adds interest, so delays directly increase the cost of the loan.
The rate drives both phases
A higher rate raises the interest-only payment and the permanent payment together, so small rate changes matter.
Construction loans also often carry a slightly higher rate than a standard purchase mortgage because the lender takes on more risk while there is no finished home to secure the loan. Comparing the all-in cost — construction interest plus the permanent mortgage — against a standard purchase is part of deciding whether to build.
The interest-only payment is the most you will owe each month during the build, reached once all funds are drawn; early in construction your actual payment will be lower. The construction interest is a planning estimate of what the draw period costs in total, based on an average balance. The permanent payment is your regular mortgage payment after conversion. Together they show the full arc of the loan: a lighter interest-only phase, the one-time cost of financing the build, and the long-term payment you will live with. Treat the construction-interest figure as an approximation, since it depends on how quickly funds are actually drawn.
The arithmetic is exact; your actual loan terms may differ.
An estimate — confirm with your lender
This calculator uses a single rate for both phases and assumes funds are drawn roughly evenly, which sets the construction interest near half the fully-drawn figure. Real loans vary: draw schedules, separate construction and permanent rates, lender fees, points, property taxes, and insurance all change the true cost, and many construction loans require interest reserves or a single closing with its own terms. Use the result for planning only and confirm the exact numbers with your lender, and consult a qualified financial advisor or mortgage professional before committing to a build.