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How Construction Loan Payments Work
Unlike a traditional mortgage where you receive the full loan amount at closing, a construction loan disburses funds in stages called draws. Your lender releases money as your builder completes milestones — foundation, framing, mechanical systems, interior finish, and final completion. You pay interest only on the amount actually drawn, so your monthly payment starts small and increases as construction progresses.
Once construction is complete, most construction-to-permanent (C2P) loans automatically convert to a standard amortizing mortgage. At that point, your payment becomes a fixed principal-and-interest amount based on the full loan balance. This calculator models both phases so you can plan for the full cost of building your home.
Understanding the Draw Schedule
A typical construction loan has five standard draw milestones. Each draw releases a percentage of the total loan amount as work is completed and inspected:
| Milestone | Typical % | Description |
|---|---|---|
| Foundation | 15% | Site prep, excavation, foundation pour |
| Framing | 25% | Structural framing, roof, exterior sheathing |
| Mechanicals / Lock-up | 25% | Plumbing, electrical, HVAC, windows, doors |
| Interior Finish | 25% | Drywall, flooring, cabinets, fixtures |
| Completion | 10% | Final inspection, landscaping, punch list |
Frequently Asked Questions
What is the monthly payment on a $300,000 construction loan?
During construction, you typically pay interest only on the amount drawn — not the full $300,000. Assuming a 7.52% rate and an average drawn balance of $150,000 (half the total), the estimated monthly interest payment would be approximately $940. Once the loan converts to a permanent mortgage, the full principal-and-interest payment on $300,000 at 7.52% over 30 years would be approximately $2,102/month.
Do I have to put 20% down on a construction loan?
Most construction lenders require 20–25% of the total project cost as a down payment, though some programs accept less. If you already own the land, its equity often counts toward your borrower contribution — potentially reducing or eliminating the cash needed at closing. FHA and VA construction loan programs may allow lower down payments for qualifying borrowers.
How do you calculate a construction loan payment?
Construction loan payments are interest-only, calculated on the amount actually disbursed (drawn), not the full loan amount. As your builder completes milestones and draws funds, your balance — and payment — increases. The formula is: (Current Drawn Balance × Annual Rate) ÷ 12. For example, if $120,000 has been drawn at 7.5%, the monthly payment is ($120,000 × 0.075) ÷ 12 = $750. Use the calculator above to model your specific scenario.
What is the average construction loan rate right now?
As of June 11, 2026, the average 30-year fixed mortgage rate is 6.52% (source: Freddie Mac PMMS). Construction loans typically carry a premium of 1.0–2.0 percentage points above conventional rates due to the higher risk during the build phase, putting the estimated construction rate at approximately 7.52%. Actual rates vary by lender, borrower profile, and loan structure.