How to use the calculator
- Land cost. Enter what you paid or will pay for the lot. If you already own it, check "I already own this land" and enter its current value, since land equity can count toward your contribution.
- Site and development costs. Clearing, grading, utilities, driveway, septic or sewer connection and similar work. This is often underestimated, especially on sloped or rural lots.
- Home construction cost. The builder's price for the house itself. For a realistic number, get a free cost estimate from CustomHomeQuote and then builder bids.
- Down payment or borrower contribution. Enter it as a percentage or a dollar amount. It can include cash and, in many programs, equity in land you own.
- Construction phase. How many months the build will take. Longer builds mean more months of interest-only payments.
- Permanent loan term. The length of your mortgage after construction: 15, 20 or 30 years.
- Interest rate (est.). Use a rate you've been quoted. If you don't have one yet, see current benchmark rates for context, understanding that benchmarks aren't quotes.
How construction loan payments work
A standard mortgage funds all at once. A construction loan releases money in draws as work is completed and inspected, and you pay interest only on the amount drawn so far. That makes your payment small early on and larger as the loan balance grows.
The interest-only payment is calculated as: drawn balance × annual interest rate ÷ 12. After construction, a construction-to-permanent loan converts to a regular mortgage, and your payment includes principal and interest on the whole loan amount over the permanent term. Read more in How Construction Loans Work and Construction-to-Permanent Loans Explained.
Understanding draws
Lenders release funds at milestones. A typical build moves through stages like these, though your lender's schedule will differ:
| Stage | What's usually happening |
|---|---|
| Foundation | Site prep, excavation and foundation work |
| Framing | Structural framing, roof and exterior sheathing |
| Mechanicals / lock-up | Plumbing, electrical, HVAC, windows and doors |
| Interior finish | Drywall, flooring, cabinets and fixtures |
| Completion | Final inspection, landscaping and punch list |
The share of the loan released at each stage is set in your construction agreement. See our draw schedule guide.
What this calculator doesn't include
Your actual costs will likely be higher than the calculator's payment results because real loans include items that a simple payment estimate leaves out:
- Property taxes and homeowners insurance (and flood insurance, if your lot is in a flood zone)
- Mortgage insurance, which applies to FHA loans and to conventional loans with a small down payment
- Closing costs, loan fees, points, and draw or inspection fees
- A contingency reserve for cost overruns. See contingency reserves.
- An interest reserve, if your lender builds interest into the loan
- Changes in a variable construction-phase rate during the build
Next steps
- Check what you can afford with the affordability estimator.
- Review the loan requirements and document checklist.
- Estimate your build cost with CustomHomeQuote.
Get matched with a construction-loan specialist → They can give you actual quotes. Free, no obligation.
Frequently Asked Questions
How do you calculate a construction loan payment?
During construction, payments are typically interest only on the amount drawn. The formula is drawn balance × annual interest rate ÷ 12. For example, if you've drawn $120,000, your monthly interest-only payment is $120,000 × your annual rate ÷ 12. After construction, the permanent payment is a standard principal-and-interest payment on the full loan.
What interest rate should I enter?
Use a rate you've been quoted by a lender. If you don't have one, view our rates page for benchmark context and try several rates to see how sensitive your payment is. Construction rates are typically higher than standard mortgage rates, so don't use a mortgage-rate headline as your estimate.
Do I have to put 20% down on a construction loan?
It depends on the lender and program. For example, FHA's minimum required investment is 3.5% for borrowers with a credit score of 580 or higher (see our FHA construction loan guide), and conventional lenders set their own requirements. If you own the land, its equity can often count toward your contribution.
Why is my real payment higher than the calculator's result?
The calculator estimates principal and interest. Taxes, insurance, mortgage insurance, fees and any rate changes are extra. Ask a lender for a Loan Estimate to see the full cost.
Is the calculator a loan offer?
No. It's an educational estimate. Only a lender can give you an offer or a rate quote, and approval depends on your credit, income, builder, plans and appraisal.