Construction Loan Calculator

Last Updated: Jul 21, 2025

Created by

Saqib Hanif

Saqib Hanif is the CEO and founder of Calculator Value. He builds calculators and educational content across sports, math, and science, and supports a limited set of construction-related calculators. Read full profile

This Construction Loan Calculator computes monthly loan payments, total amount paid, and total interest paid using the standard amortization formula.

Key Formulas

r = (Annual Interest Rate ÷ 100) ÷ 12
n = Term (years) × 12
Factor = (1 + r)ⁿ
Monthly Payment = P × (r × Factor) ÷ (Factor − 1)
Total Amount Paid = Monthly Payment × n
Total Interest Paid = Total Amount Paid − P

Example

For a 100,000 dollars loan at 5% annual interest over 30 years:

r = 0.05 ÷ 12 ≈ 0.004167
n = 30 × 12 = 360
Factor = (1 + 0.004167)³⁶⁰ ≈ 4.4677
Monthly Payment ≈ 100000 × (0.004167 × 4.4677) ÷ (4.4677 − 1) ≈ 536.82 dollars
Total Amount Paid ≈ 536.82 × 360 ≈ 193,255.20 dollars
Total Interest Paid ≈ 193,255.20 − 100000 = 93,255.20 dollars

This calculator follows standard mortgage amortization conventions; no endorsement is implied.

Industry-Standard Formulas: The formulas and methods used in this calculator follow widely accepted standards in Financial.
Careful Verification: The calculator is tested to ensure it behaves correctly across a range of inputs.
Continuous Updates: The calculator is updated as needed to reflect better accuracy and usability.

Sources:

NBER Working Paper No. 9759: 'Household Risk Management and Optimal Mortgage Choice' by Campbell & Cocco (2003)

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Building a home or commercial structure requires critical financial planning, informed decision‑making, and ongoing management. A construction loan differs from a traditional mortgage: it disburses funding in stages as the work is completed, and then permanently converts to a mortgage once construction is finished.

In this article, we will cover:

What a Construction Loan Calculator Is
How It is Calculated & What Formula Is
A Simple Worked Example

A person is calculating construction loan for home building

What a Construction Loan Calculator Is

A Construction Loan Calculator is an online tool that estimates your monthly payment, total amount repaid, and total interest based on three inputs

Loan Amount — The total principal amount you borrow (e.g,. $80,000).
Annual Interest Rate — The interest rate on the loan, expressed as a percentage you pay each year (e.g., 5%).
Term (Years) — The number of years over which the loan is repaid.

How It Is Calculated — Formula

The formula behind the calculator can be difficult to compute by hand. Here is standard amortization formula:

$M = P \frac{\frac{r}{12} (1 + \frac{r}{12})^{12 t}}{(1 + \frac{r}{12})^{12 t} - 1}$

Where:

P = Loan principal,

r = annual interest rate as a decimal (e.g. 6% → 0.06),

t = term in years.

Now, we will walk through an example to gain a deep understanding of how the system works behind this calculator. Keep reading!

A Simple Worked Example

Imagine you plan to construct a property and you borrow $120,000 at an annual interest rate of 5% for 2 years. Here is how to compute those values to determine your monthly payment.

Loan Amount = P = $120,000
Annual Interest Rate = r = 5% or 0.05,
Term (Years) = t = 2 years

Now let's compute the values:

$P = $ 120, 000$ $r = 0.05$ $t = 2$

Total number of monthly payments:

$12 t = 24$

Monthly interest rate:

$\frac{r}{12} = \frac{0.05}{12} \approx 0.0041667$

Monthly Payment Calculation:

$M = P \frac{\frac{r}{12} (1 + \frac{r}{12})^{12 t}}{(1 + \frac{r}{12})^{12 t} - 1}$ $M = $ 120, 000 \times \frac{0.0041667 (1.0041667)^{24}}{(1.0041667)^{24} - 1}$ $M \approx $ 5, 263.27$

Finally:

Monthly Payment (M): $5,263.27

Total Paid Over 2 Years: $5,263.27 × 24 = $126,318.48

Total Interest Paid: $126,318.48 − $120,000 = $6,318.48

You will pay $5,263.27 per month for 2 years, repaying $126,318 in total—of which $6,318 is interest.