David is a Chartered Financial Analyst with over 15 years of experience in real estate financing, specializing in construction-to-permanent loans and property development financing.
This 4-in-1 Construction Loan calculator models the *permanent* amortizing phase of your loan. Enter any three variables—Loan Amount, Annual Rate, Term, or Monthly Payment—and we will solve for the fourth.
Construction Loan Calculator
Construction Loan Payment Formulas
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
Solve for Loan Amount (P):
P = M [ (1 + i)^n – 1 ] / [ i(1 + i)^n ]
Solve for Loan Term (T):
T = ln(M / (M – Pi)) / (n * ln(1 + i))
Solve for Rate (R):
Solved iteratively (no direct formula)
Formula Variables
- (P) Loan Amount: The total principal amount borrowed for the construction project.
- (R) Annual Rate: The annual interest rate for the permanent, amortizing portion of the loan.
- (T) Loan Term: The total length of the permanent loan (e.g., 30 years), *not* the short construction-only phase.
- (M) Monthly Payment: The fixed monthly payment (Principal & Interest) paid during the permanent loan phase.
- (i) Monthly Rate: The annual rate divided by 12.
- (n) Total Payments: The total number of payments (Term in years * 12).
Related Calculators
What is a Construction Loan Calculator?
A Construction Loan Calculator helps estimate the payments on a loan used to finance the building of a new home. Unlike a traditional mortgage, a construction loan is a short-term loan (usually 12-18 months) where funds are disbursed in stages (called “draws”) as work is completed. During this construction phase, you typically make interest-only payments on the money that has been drawn so far.
This calculator is designed to model the *second* phase of the loan, known as the “construction-to-permanent” phase. Once the home is built, the construction loan is converted into a standard, amortizing mortgage. This calculator helps you understand what your final, long-term (e.g., 30-year) principal and interest (P&I) payments will be after the building is complete.
This 4-in-1 tool allows you to solve for any of the four key variables of your permanent loan: Loan Amount, Annual Rate, Term, or the final Monthly Payment.
How to Calculate Permanent Loan Payments (Example)
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Determine Final Loan Amount (P)
After your home is built, your total Loan Amount (P) is $400,000. Your “construction-to-permanent” loan converts to a 30-year term (T) at a fixed Annual Rate (R) of 7.5%. You want to find your permanent Monthly Payment (M).
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Convert Annual Rate to Monthly (i)
First, convert the annual rate to a monthly decimal: i = (7.5% / 100) / 12 = 0.075 / 12 = 0.00625
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Calculate Total Number of Payments (n)
Next, find the total number of monthly payments: n = 30 Years * 12 Months/Year = 360 payments
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Apply the Amortization Formula
Use the standard loan payment formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
M = 400,000 [ 0.00625 * (1 + 0.00625)^360 ] / [ (1 + 0.00625)^360 – 1 ]
M = 400,000 [ 0.00625 * (9.4348) ] / [ 9.4348 – 1 ]
M = 400,000 [ 0.058967 ] / [ 8.4348 ]
M = 400,000 * 0.006992
M = $2,796.80 -
Final Result
Your fixed monthly principal and interest payment for the 30-year permanent loan will be $2,796.80.
Frequently Asked Questions (FAQ)
No. This calculator is designed to model the final, permanent amortizing (principal + interest) loan. During the short construction phase, you typically pay only interest on the funds as you draw them, which results in a smaller, variable payment that is not calculated here.
What is a “construction-to-permanent” loan?This is the most common type of construction financing. It’s a single loan that covers both the construction phase (e.g., 12 months, interest-only) and the permanent mortgage (e.g., 30 years, P&I) afterward. It saves you from having to get two separate loans and two separate closings.
How much can I borrow for a construction loan?You can use this calculator to work backward. Enter the final Monthly Payment (M) you can afford, a current Annual Rate (R) for permanent loans, and the Loan Term (T) (e.g., 30 years). The calculator will solve for the Loan Amount (P) you can support for your permanent mortgage.
Are construction loan rates higher?Yes, the rate for the short-term construction phase is typically higher and variable. The rate for the permanent phase (which this calculator models) is more in line with standard mortgage rates, though it may be slightly higher than for a pre-built home.