Construction Loan Calculator
A construction loan pays for building a home in stages, called draws. During the build, you usually pay interest only on the money drawn so far. Once the home is done, the loan is replaced by a permanent loan with regular payments. This shows both stages.
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How it works
Interest during the build is worked out on the average amount drawn over the building months. The monthly interest is the total loan, times the average share drawn, times the build rate divided by twelve.
The permanent payment is the standard loan payment on the full loan over the years you enter, at the permanent rate. Loan fees and any rate changes during the build are not included.
Worked example
On a $350,000.00 construction loan with an average of 60% drawn, the build interest is $1,400.00 a month, about $16,800.00 over 12 months. The permanent payment after that is $2,212.24 a month.
Questions
Why does the build phase cost less per month?
You pay interest only on what has been drawn. Many builds draw money gradually, so the balance stays below the full loan for much of the time.
What is a permanent loan?
It is the long-term mortgage that replaces the construction loan once building is finished. Its rate and terms can differ from the build rate.
How do I estimate the average share drawn?
Look at your builder's draw schedule, and average the balance over the build months.
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