Construction Loan Calculator
Calculate ground-up residential construction loans. Model progressive draw schedules, interest-only payments during construction, contingency reserves, and permanent mortgage transitions.
Permanent 30-Year P&I will be $3109.77/mo after construction completion.
Build Budget & Financing Parameters
Financing Ground-Up Builds with a Construction Loan
Financing custom home construction requires specialized short-term construction financing rather than a traditional mortgage. A construction-to-permanent loan releases funds incrementally across a 4 to 6-stage builder draw schedule (site prep, foundation, framing, drywall, electrical, finishes). During the 12 to 18-month construction period, borrowers pay interest only on the funds actively drawn, before the loan converts into a permanent 30-year amortizing mortgage.
Key Investment Features
Multi-Stage Draw Schedule Simulator
Models progressive disbursement across Foundation (20%), Framing (25%), Rough-In (20%), Finishes (25%), and Final Retainage (10%).
Average Balance Interest Calculation
Accurately reflects that interest is only paid on disbursed funds rather than the full loan commitment.
Loan-to-Cost (LTC) & Down Payment
Computes borrower equity contribution based on total land and construction hard costs (typically 15% to 25% down).
Builder Contingency Reserves
Calculates standard 10% to 15% cost overrun buffers required by construction underwriters.
Seamless Permanent Loan Conversion
Calculates long-term 30-year principal and interest payments following certificate of occupancy (CO).
Exportable Lender Draw Sheet
Generate an itemized construction budget summary ready for bank loan submission.
Real Estate Scenarios
- ✓Custom Home Builders
Budget interest carrying costs while constructing a custom dream home on raw land.
- ✓Spec Home Developers & Flippers
Estimate commercial construction loan debt service before breaking ground on ground-up spec builds.
- ✓Major Home Additions & Scrape-Offs
Finance major structural home additions exceeding standard home equity line limits (HELOC).
- ✓Commercial General Contractors
Provide residential clients with transparent monthly cash-flow expectations during build milestones.
Frequently Asked Questions
How do payments work during a construction loan?
During the construction phase (usually 9 to 18 months), you only pay interest on the money that has actually been disbursed to the builder, not on the full loan amount. As construction progresses and more draws are completed, your monthly interest-only payments gradually increase.
What is a single-close (construction-to-permanent) loan?
A single-close loan combines your construction financing and long-term 30-year mortgage into one transaction with one closing. Once construction is complete and the certificate of occupancy is issued, the loan automatically converts to a standard mortgage with zero additional closing costs.
What is a builder draw schedule?
A draw schedule is a milestone-based payment plan agreed upon by the lender, builder, and borrower. Before each draw is released, an independent bank inspector visits the site to verify that the specified work (e.g. framing or plumbing rough-in) has been completed properly.
Why do lenders require a contingency reserve?
Unforeseen supply chain delays, weather disruptions, or permitting changes routinely increase building costs. Construction lenders mandate a 10% to 15% contingency reserve built into the budget to ensure the home can be finished even if cost overruns occur.
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