Interest during the build, draw by draw, and the mortgage payment after
Updated 2026-10-02
To calculate a construction loan, add the land, build and soft costs, take off your down payment, then charge interest only on the money drawn so far each month while the home is built. When it's finished the loan becomes a regular mortgage. Enter your costs, build time and rates: the calculator shows every month's interest, the total, and the payment after. Selling a home to fund it? Bridge loan calculator · interest-only payments.
Your build
Your construction loan
Total interest during the build
$18,417
average $1,534.72 a month
Loan amount
$400,000
cash down $100,000 · 80% of cost
Interest payment, first → last month
$2,833.33
from $236.11 in month 1
Mortgage payment after (P&I)
$2,594.39
once the home is finished
Draw schedule: balance and interest by month
Month
Drawn balance
Interest due
1
$33,333
$236.11
2
$66,667
$472.22
3
$100,000
$708.33
4
$133,333
$944.44
5
$166,667
$1,180.56
6
$200,000
$1,416.67
7
$233,333
$1,652.78
8
$266,667
$1,888.89
9
$300,000
$2,125.00
10
$333,333
$2,361.11
11
$366,667
$2,597.22
12
$400,000
$2,833.33
Estimates for planning, not a loan offer or financial advice. Every rate and cost here is a number you enter or an example you can change; confirm figures with your lender.
How construction loan interest is calculated
Loan = (land + build + soft costs) − down payment · Balance in month k = Loan × k ÷ months · Interest in month k = balance × r · Total ≈ Loan × r × (months + 1) ÷ 2
r is the construction rate divided by 12. The calculator assumes equal draws at the start of each month, which is a simple stand-in for a builder's draw schedule: real draws follow inspections (foundation, framing, dry-in, finishes) and are often heavier in the middle. The permanent payment uses the standard fixed-rate formula on the full loan.
Worked example
A $100,000 lot and a $400,000 build make a $500,000 project. With 20% down ($100,000) the loan is $400,000. Drawn evenly over 12 months at 8.5%, month 1 interest is $236.11 on $33,333 drawn, month 12 is $2,833.33 on the full loan, and the build costs $18,417 in interest. Then at 6.75% for 30 years the mortgage payment is $2,594.39.
How this calculator works, in plain language
A construction lender doesn't hand over the whole loan on day one. It pays the builder in stages as work is finished, and you owe interest only on what has been paid out. So the bill starts small and grows every month until the house is done. The calculator spreads the loan evenly across the build months, works out each month's interest, adds them up, and then shows the normal mortgage payment you'll have once the home is complete and the loan converts or is refinanced.
Construction loan costs by scenario
Six builds with 20% down, an example 8.5% construction rate and a 6.75% 30-year mortgage after. Rates are examples, not quotes.
Construction loan, interest during the build and payment after
Scenario
Loan
Build time
Last month's interest
Total build interest
Mortgage P&I after
$300k build on $60k land
$288,000
9 mo
$2,040.00
$10,200
$1,867.96
$400k build on $100k land
$400,000
12 mo
$2,833.33
$18,417
$2,594.39
$400k build, 18-month build
$400,000
18 mo
$2,833.33
$26,917
$2,594.39
$500k build on $120k land
$496,000
12 mo
$3,513.33
$22,837
$3,217.05
$650k build on $150k land
$640,000
15 mo
$4,533.33
$36,267
$4,151.03
$250k build on $50k land
$240,000
8 mo
$1,700.00
$7,650
$1,556.64
Time is the biggest lever you control: the same $400,000 loan costs $18,417 in interest over 12 months and $26,917 over 18.
Common construction loan mistakes
Budgeting the full payment from month one. Interest starts small and climbs; plan cash flow for the last months, when you may also be paying rent or a current mortgage.
Leaving out soft costs. Permits, plans, utility hookups and a contingency are real costs; lenders often require a contingency in the budget.
Assuming the build finishes on time. Weather and supply delays add months of near-peak interest. Run the calculator with a few extra months.
Forgetting the final mortgage. With a two-time close, the permanent rate is set at the end; a higher rate then raises the payment for decades.
Not counting land equity. Land you own can cover much or all of the down payment.
This is an estimate for planning, not a loan offer. Your lender's draw schedule and Loan Estimate are final.
Building a home
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During the build you usually pay interest only on the money drawn so far: drawn balance × rate ÷ 12. With a $400,000 loan drawn evenly over 12 months at 8.5%, the first month's interest is $236.11 and the last $2,833.33, for $18,417 in total. When the home is finished the loan becomes (or is replaced by) a regular mortgage.
How much do you need down for a construction loan?
It depends on the lender and loan type, and is often more than for buying an existing home. Enter your lender's requirement above; 20% of the total project cost is used here only as an example. Land you already own can usually count toward it.
Does land I own count as a down payment?
Often yes: lenders commonly credit the land's value as equity. Tick "I already own the land" above. In the example, owning $100,000 of land covers the $100,000 down payment, so you bring no extra cash and the loan is $400,000.
What is a construction-to-permanent loan?
A single loan with one closing that pays for the build and then converts to a regular mortgage. A two-time close uses a short construction loan and a separate mortgage at the end, with two sets of closing costs but the chance to shop the final rate.
Why is construction loan interest so low at first?
Because the lender releases money in draws as work is done, and you only pay interest on what has been drawn. The payment climbs each month as the balance grows, peaking just before completion.
What happens if the build takes longer?
You keep paying interest on a nearly full balance. Stretching the same $400,000 build from 12 to 18 months raises construction interest from $18,417 to $26,917. Ask how your lender handles extensions and fees.
Is construction loan interest higher than a mortgage rate?
Construction loans are often priced above standard mortgage rates because the lender is financing a house that doesn't exist yet. The rates above are examples only; use the quotes you get.
