Construction Loan Calculator
Interest-only cost during the build phase.
Calculate interest-only payments and total interest paid during a construction loan build phase with drawdowns. Enter loan amount and see the result instantly.
What this tool does
Enter loan amount, rate, build months, and draw schedule. The tool estimates total interest during construction.
Enter Values
Formula Used
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Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
Construction loans pay interest only during the build, against the drawn balance. A 400,000 loan drawn evenly over 12 months at 7% averages about 14,000 of interest during construction — roughly half the interest on the full loan, because the average balance is only half. At project end the loan converts to a standard mortgage.
Run it with sensible defaults
Using total loan amount of 400,000, annual rate of 7%, build duration of 12, average draw of 50%, the calculation works out to 14,000.00. Nudge the inputs toward your own situation and the output recalculates instantly. The defaults are meant as a starting point, not a recommendation.
The levers in this calculation
The inputs — Total Loan Amount, Annual Rate, Build Duration, and Average Draw % — do not pull with equal force. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.
How the math works
Interest-only on average drawn balance across build. Average draw percentage approximates gradual drawdowns. The working is transparent — you can verify every step yourself in the formula section below. No black box, no opaque "proprietary model".
What the headline rate hides
Lenders quote a rate; what you pay is a blend of that rate, fees, insurance, and any early-repayment penalty built into the product. The figure here isolates the core interest cost so you can compare like-for-like across deals — then add the other costs separately before signing anything.
What this doesn't capture
The figure excludes arrangement fees, valuation costs, legal fees, insurance, and any early-repayment charges — those can add several thousand to the headline cost. Rate changes at renewal for fixed-term deals will shift the picture further. Use this for the core interest/principal math and add the other costs on top.
Construction loan interest produces a total based on the inputs provided.
Inputs
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
Interest-only on average drawn balance across build. Average draw percentage approximates gradual drawdowns.
References
Frequently Asked Questions
Why interest-only?
What happens at build end?
Is the rate higher?
What if the build overruns?
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