Interest-Only Construction Loan Calculator
During construction, most lenders bill interest only on the amount drawn so far, so payments start small and rise as the builder draws funds. Estimate those payments month by month below.
Completely free, no sign-up. Last updated: November 12, 2026
Calculate your construction interest-only payments
Assumption: monthly draws arrive mid-month. An initial draw (such as land or permit costs) arrives at the start of month 1 and earns a full month of interest; the rest follows your selected pattern.
- First month interest payment
- $97.22
- Peak (final-month) interest payment
- $2,236.11
- Average monthly interest
- $1,166.67
- Total construction interest
- $14,000.00
- Full-balance interest-only payment
- $2,333.33
The full-balance figure assumes the entire loan is outstanding all month, so no month in this model costs more at the entered rate. It is $2,236.11 more than your first-month payment because most funds are not drawn yet.
What if the build runs 3 months late? Add $7,000.00 in interest at the full balance and unchanged rate ($2,333.33 per month), before any extension fees.
Month-by-month construction draw schedule
Month 1 draw includes any initial funds at closing. Swipe or scroll horizontally to see every column on small screens.
| Month | Draw | Balance after draw | Interest payment |
|---|---|---|---|
| 1 | $33,333.33 | $33,333.33 | $97.22 |
| 2 | $33,333.33 | $66,666.67 | $291.67 |
| 3 | $33,333.33 | $100,000.00 | $486.11 |
| 4 | $33,333.33 | $133,333.33 | $680.56 |
| 5 | $33,333.33 | $166,666.67 | $875.00 |
| 6 | $33,333.33 | $200,000.00 | $1,069.44 |
| 7 | $33,333.33 | $233,333.33 | $1,263.89 |
| 8 | $33,333.33 | $266,666.67 | $1,458.33 |
| 9 | $33,333.33 | $300,000.00 | $1,652.78 |
| 10 | $33,333.33 | $333,333.33 | $1,847.22 |
| 11 | $33,333.33 | $366,666.67 | $2,041.67 |
| 12 | $33,333.33 | $400,000.00 | $2,236.11 |
Estimates only; confirm with your lender. Excludes taxes, insurance, fees and capitalized interest. Totals use unrounded values; displayed rows may differ by a few cents when added.
How interest-only construction loan payments are calculated
Monthly interest = (balance at the start of the month + half of that month’s scheduled draw) × annual interest rate ÷ 12. Enter the rate as a percentage; the calculation converts it to a decimal. With no initial draw, the starting balance is zero. A closing draw enters the starting balance before month 1 interest is calculated.
Equal draws divide the remaining loan evenly. Front-loaded draws use descending monthly weights, from the number of build months down to one; back-loaded draws reverse those weights. Each schedule draws the same total loan amount. Payments cover interest only, so they do not reduce principal.
The full-balance shortcut is loan amount × rate ÷ 12. It overstates early payments because funds have not yet been released. Actual lenders may calculate interest daily using draw dates and a 360- or 365-day year, so a statement can differ from this monthly estimate.
Interest-only payment example: equal vs front-loaded vs back-loaded draws
Assumed example: $400,000 loan, 7.0% annual interest, 12 months, no initial draw, and mid-month monthly draws. These fixed examples use the same calculation as the tool; changing your inputs above does not change this comparison.
Swipe the table sideways to see peak payment and total interest.
| Draw pattern | First-month payment | Peak payment | Total construction interest |
|---|---|---|---|
| Equal monthly draws | $97.22 | $2,236.11 | $14,000.00 |
| Front-loaded (more early) | $179.49 | $2,318.38 | $18,277.78 |
| Back-loaded (more late) | $14.96 | $2,153.85 | $9,722.22 |
The full-balance payment is $2,333.33 per month in all three cases. Equal draws average $1,166.67 per month. Front-loading costs more because money stays outstanding longer; back-loading costs less under these assumptions. Your builder’s milestones and lender approvals determine when funds can actually be released.
What changes your interest-only payment
Construction loans are often priced at prime plus a lender margin. Our construction loan rates page lists prime at 7.00%, FRED DPRIME, October 27, 2026. This dated benchmark is context, not a construction loan quote. A variable rate can change during the build; this tool holds your entered rate constant.
Earlier draws raise interest, while inspection or approval delays can postpone disbursements and extend the build. The three-month delay check assumes all funds are already drawn. Some lenders let you fund payments through an interest reserve; ask whether it reduces funds available for construction and whether financed interest earns further interest. Budget separately for inspection charges, extension fees and housing costs during delays.
What happens after construction ends
A construction-to-permanent loan converts to an amortizing mortgage when completion requirements are met. A stand-alone construction loan generally needs repayment or refinancing. Principal-and-interest payments then replace interest-only payments, and the rate or term may change.
Use the permanent loan calculator to compare mortgage terms and check its assumption about financed construction interest. The home construction loan calculator models both phases with beginning-of-month draws, so its construction interest can be higher than this page’s mid-month estimate.
Interest-only construction loan calculator FAQ
Do I pay interest on the entire construction loan?
During construction, most lenders charge interest only on funds already drawn. Undrawn funds do not enter this calculator’s interest balance. Once the full loan is drawn, the full-balance interest-only payment applies for each complete month at the same rate.
Why is my final-month payment below the full-balance payment?
The last scheduled draw arrives halfway through the final month in this model, so that portion earns only half a month of interest. The full-balance figure assumes every dollar is outstanding for the whole month. They match if all funds were drawn at closing.
Does an initial draw for land increase construction interest?
Yes. An initial draw at closing is outstanding from the start of month 1 and accrues a full month of interest immediately. The remaining loan follows your selected monthly pattern. At any rate above zero, earlier borrowing increases total interest when the rate and build length stay the same.
Can I include interest in the construction loan?
Some lenders allow an interest reserve funded from the loan. That can reduce cash payments during construction, but financed interest uses available funds and can itself accrue interest. This calculator assumes you pay interest monthly and does not capitalize it or add a reserve to the balance.
What if construction takes three months longer?
The delay estimate adds three full months of interest on the fully drawn loan at the entered rate. It assumes no principal repayment or rate change and excludes extension fees. Actual extra interest depends on your drawn balance and how long your lender permits the construction phase to continue.