Introduction
A construction loan works differently than a regular home loan. You borrow money in stages as your home is built, and you only pay interest during that time. Once the build is done, the loan turns into a standard mortgage with monthly payments that include both principal and interest. This makes it harder to figure out your true costs upfront.
This construction loan calculator does the math for you. Enter your land cost, build budget, interest rates, and loan terms to see what you will pay during each phase of the project. The tool calculates your interest-only payments during construction, your permanent mortgage payment after the build, and the total cost of the loan over its full life. It also shows key lender ratios like loan-to-value and loan-to-cost so you can see where you stand before you apply.
You can compare one-time close versus two-time close structures, test different down payment amounts, and switch between land purchase and land equity scenarios. The built-in amortization schedule breaks down every month across both phases so you know exactly where your money goes. Whether you are building a custom home, a spec house, or acting as an owner-builder, this calculator helps you plan your budget and understand your financing before construction begins.
How to Use Our Construction Loan Calculator
Enter details about your land, building costs, and loan terms below. The calculator will show your estimated monthly payments, total interest, loan-to-value ratios, and a full payment schedule for both the construction phase and the permanent mortgage.
Transaction Type — Pick "Purchase" if you are buying land and building new. Pick "Refinance" if you are refinancing a property you already own.
Land Scenario — Choose "I Own My Land" if you already have the lot. Choose "I Need to Buy Land" if the land purchase is part of your project.
Estimated Completed Home Value — Enter what you think your home will be worth after it is fully built. This is used to figure out your loan-to-value ratio.
Occupancy / Use — Select how you plan to use the home. Options are primary residence, second home, or investment property.
Land Equity Contribution — If you own your land, enter its current value here. This equity counts toward your project and lowers the amount you need to borrow. Use the slider or type a number.
Build Cost — Enter the total hard construction cost. This covers labor and materials to build the home.
Land Cost — Enter the purchase price of the land. This field only shows when you select "I Need to Buy Land." If you are financing the land separately, you may also want to explore a land loan calculator.
Builder Fees — Enter any contractor overhead or project management fees your builder charges on top of the build cost.
Soft Costs — Enter costs for permits, architectural plans, engineering, and inspections.
Contingency Reserve — Enter a buffer amount for unexpected costs or change orders. The calculator suggests 10% of your build cost, but you can change it.
Down Payment — Enter the cash you plan to put toward the project upfront. The calculator shows this as a percentage of your total project budget. Not sure how much to set aside? Try our down payment calculator for guidance.
Construction Loan Interest Rate — Enter the annual interest rate for the construction phase of your loan.
Length of Project — Use the slider or type a number to set how many months you expect construction to take. You can choose 1 to 24 months.
Construction Type — Select the type of build. Options are Custom Home Build, Spec/Semi-Custom, or Owner-Builder.
Interest-Only During Construction — Turn this on to make interest-only payments during construction based on how much of the loan has been drawn. Turn it off to model full-balance interest from day one.
Mortgage Interest Rate — Enter the annual interest rate for your permanent mortgage after construction ends.
Mortgage Term — Pick how long your permanent mortgage will last. Choose 15, 20, or 30 years.
Loan Structure — Pick "One-Time Close" to use a single closing for both the construction loan and the mortgage. Pick "Two-Time Close" if there will be a second closing, which adds roughly $9,000 to your loan.
Annual Property Tax — Enter the estimated yearly property tax on the finished home. Found in the Advanced Options section.
Annual Homeowner's Insurance — Enter the estimated yearly insurance premium for the completed home. Found in the Advanced Options section.
Monthly HOA Dues — Enter any monthly homeowners association fees. Leave at zero if there are none. Found in the Advanced Options section.
Closing Cost Amount — Enter the total estimated closing costs for your loan. Found in the Advanced Options section.
Closing Cost Treatment — Choose whether your closing costs are rolled into the loan or paid out of pocket. Found in the Advanced Options section.
Click Calculate to see your results. Use Reset to return all fields to their starting values, or click a Preset Scenario button to quickly load a common setup.
What Is a Construction Loan?
A construction loan is a short-term loan used to pay for building a new home. Unlike a regular mortgage, the lender gives you money in stages as the house is being built. These stages are called draws. During the building phase, you usually only pay interest on the money that has been drawn so far. This is called an interest-only payment. Once the home is finished, the loan either converts into a standard mortgage or you close on a new mortgage to replace it.
How Construction Loans Work
A construction loan has two main phases. The first phase is the construction period, which typically lasts 6 to 18 months. During this time, you make small interest-only payments that grow as more money is drawn to pay your builder. The second phase is the permanent mortgage, which begins after the home is complete. At that point, you start making full monthly payments that include both principal and interest, just like a normal home loan.
One-Time Close vs. Two-Time Close
There are two common loan structures. A one-time close (also called a construction-to-permanent loan) combines both phases into a single loan with one set of closing costs. A two-time close uses two separate loans — one for building and one for the mortgage after. The second closing adds extra fees, but it lets you shop for a better mortgage rate after construction is done.
Key Terms to Know
- Loan-to-Cost (LTC): How much of the total project cost the lender is covering. Most lenders cap this around 80% to 85%.
- Loan-to-Value (LTV): The loan amount compared to the finished home's appraised value. Lenders usually want this below 90%.
- Contingency Reserve: Extra money set aside for surprise costs, like price increases or design changes. A common rule is to budget at least 10% of your build cost.
- Land Equity: If you already own your land, its value can count toward your down payment, which lowers how much cash you need upfront. You can also explore a home equity calculator to understand the equity you hold in existing property.
- Down Payment: The cash you put into the project. Most construction loans require at least 10% to 20% of the total project budget.
What Affects Your Costs
Several things change how much you will pay. A higher interest rate raises both your construction payments and your future mortgage payment. A longer build timeline means more months of interest-only payments. Choosing a shorter mortgage term, like 15 years instead of 30, gives you a higher monthly payment but saves a large amount of interest over time. Your down payment size directly controls how much you borrow — a bigger down payment means a smaller loan and lower monthly costs. To see how your overall debt load fits your income, try using a DTI calculator. If you are weighing whether to build versus buy an existing home, our home affordability calculator can help you compare options.