Construction Loan Calculator
Plan your build financing with confidence. Interest-only draw schedule, construction-to-permanent conversion, budget tracker, one-close vs two-close cost comparison, and owner-builder mode — all real-time as you type.
Enter 0 if already owned
Total builder contract
Most lenders require 20–25%
Budget 10–15% for overruns
Avg ~8.5% (Mar 2026)
After construction ends
| Phase | Draw% | Draw $ | Cumulative | Monthly Interest |
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Construction Loan Calculator — Everything You Need to Know
Build your dream home with confidence. Understand interest-only draw payments, construction-to-permanent conversion, and how to budget your project before breaking ground — explained in plain language.
What Is a Construction Loan?
A construction loan is a short-term, higher-interest financing tool specifically designed to fund the building of a new home or major renovation. Unlike a traditional mortgage — where you receive the full loan amount upfront to buy an existing property — a construction loan releases funds in stages called "draws" as each construction milestone is completed and inspected.
During the construction phase, you only pay interest on the funds that have actually been disbursed — not the total loan amount. This interest-only structure keeps your monthly payments manageable while your home is being built. As more draws are released and the outstanding balance grows, your monthly interest payments increase accordingly.
Construction loans typically last 6 to 18 months — the expected duration of the build. Once the project receives a certificate of occupancy, the loan either converts to a permanent mortgage (in a construction-to-permanent loan) or is paid off by a separate mortgage you take out (in a stand-alone construction loan).
Money is disbursed at key milestones — foundation, framing, rough-in, drywall, and final completion — after each phase passes a lender inspection.
During construction you pay interest only on drawn funds. A $350K loan half-drawn ($175K) costs half the interest of a fully disbursed loan.
At completion, your construction loan rolls into a standard 15- or 30-year mortgage — either automatically (one-close) or via a separate application (two-close).
What Is a Construction Loan Calculator?
A construction loan calculator is a financial planning tool that estimates the cost of financing a new home build across both phases: the interest-only construction period and the permanent mortgage that follows. Because construction loans work so differently from standard mortgages — with progressive draws and rising interest payments — a regular mortgage calculator simply cannot model them accurately.
A good construction loan calculator lets you model your draw schedule, adjust phase percentages, simulate a construction-to-permanent conversion, compare one-close versus two-close loan structures, and track your project budget against your approved loan amount — all in real time.
The CatchyTools Construction Loan Calculator goes further than most by offering five dedicated modes: a Basic Estimator, Draw Schedule Planner, C-to-P Conversion Model, One-Close vs Two-Close Comparison, and a detailed Budget Tracker — giving you a complete financial picture before you break ground.
Enter land, build cost, down payment, and rates. Get your loan amount, monthly interest at each draw phase, and permanent mortgage payment instantly.
Customize phase percentages across 5 milestones. See exactly how much interest accrues each phase, and what your peak monthly payment will be at 100% draw.
Line-item your full build: site prep, foundation, framing, electrical, plumbing, finishes, permits, and architect fees. See your budget vs approved loan at a glance.
How Construction Loans Work: From Application to Move-In
Your lender qualifies you as a borrower and reviews your builder's credentials, construction plans, specifications, and detailed budget. Most lenders require a credit score of 680+, 20–25% down payment, and a licensed, insured general contractor.
An appraiser estimates the future value of your completed home based on your plans, specs, and comparable sales in the area. This appraisal determines your loan-to-value ratio and the maximum loan amount the lender will approve.
You sign loan documents and pay closing costs. Your builder receives the first draw (typically for land and site preparation, 10–15% of the loan). You begin making interest-only payments on the disbursed balance.
As each construction phase is completed — foundation, framing, rough-in, drywall, finishes — the lender sends an inspector to verify work quality. Once approved, the next draw is released. Interest payments grow with each draw as the outstanding balance increases.
After final inspection and a certificate of occupancy (CO), the last draw is released. Your total loan balance equals the full construction loan amount (minus your down payment). The interest-only phase ends.
With a one-time-close loan, your construction loan automatically converts to a permanent mortgage at the rate locked at closing — no new application, one set of closing costs. With a stand-alone loan, you now apply for a separate mortgage to pay off the construction balance, incurring a second set of closing costs.
One-Close vs Two-Close: Which Is Right for You?
This is one of the most important decisions in construction financing. Both paths ultimately give you a permanent mortgage on a finished home — but they differ significantly in cost, flexibility, and risk.
A one-time-close (construction-to-permanent) loan combines the construction phase and the mortgage into a single loan with one application and one set of closing costs. Your rate is locked at origination, protecting you from rising rates during the build. The tradeoff: you may pay a slightly higher permanent rate than what the market offers at completion, and you lose the ability to shop around.
A two-close (stand-alone) loan involves two separate transactions: the construction loan first, then a new mortgage after completion. This lets you shop for the best permanent rate after your build is finished — valuable if rates fall during construction or if you expect your financial profile to improve. The cost: two sets of closing costs, typically $8,000–$16,000 combined, and rate risk during the build.
The 5-Phase Draw Schedule Explained
A draw schedule is the agreed-upon plan that specifies how much of your loan is released at each construction milestone. Lenders use draw schedules to ensure funds are used appropriately and that construction is progressing as planned. Each draw is typically preceded by an inspection — meaning your contractor must complete the phase before receiving the next payment.
Understanding the draw schedule is critical for cash flow. Contractors often need to front costs for materials and labor before each draw is released, which is why working with an experienced GC and having adequate reserves matters enormously.
Covers site clearing, excavation, footings, foundation walls, and waterproofing. First and smallest draw — your monthly interest is lowest here.
Largest single draw. Covers structural framing, roofing, windows, and exterior doors. Your interest payments jump significantly after this release.
Electrical, plumbing, and HVAC rough-in work. Inspector confirms all systems are correctly routed before walls close up.
Insulation, drywall, flooring, cabinetry, and interior trim. Home starts to look and feel finished. By now 80–85% of funds are drawn.
Final fixtures, paint, appliances, landscaping, and walkthrough. Released after certificate of occupancy. Full loan balance now outstanding — peak monthly interest.
Construction Loan Requirements in 2026
Construction loans have stricter qualification requirements than standard purchase mortgages because they carry higher risk for lenders. Here's what most conventional lenders require:
- Credit Score 680+ — most lenders require 680 minimum; 720+ gets the best rates
- 20–25% Down Payment — based on the total project cost (land + construction)
- Debt-to-Income (DTI) ≤ 45% — including current housing and new project payments
- Licensed, Insured Builder — most lenders require a licensed GC with verifiable track record
- Detailed Plans & Budget — approved construction drawings, specs, and a line-item budget
- Cash Reserves — 2–6 months of projected payments in reserve after closing
- 10–15% Contingency Budget — lenders want to see overrun protection built into your budget
Most lenders cap the construction loan at 75–80% of total project cost. If your land + build + soft costs total $500K, expect to finance at most $400K.
At conversion, lenders also check the as-completed appraised value. If your finished home is appraised below the loan balance, you may need to bring cash to closing.
If you plan to act as your own general contractor, owner-builder loans exist but are harder to qualify for. Lenders require proof of construction experience, licensing, and often demand a lower LTC.
Construction Loan FAQs
More Financial Tools from CatchyTools
Building a home involves a web of financial decisions. Use these free calculators to plan every part of your project — from land purchase to long-term mortgage payoff.
When budgeting your build, don't forget to factor in closing costs — typically 2–6% of your loan amount. Use our loan calculator to model your permanent mortgage payment scenarios before you commit to a construction term.