Construction Loan Calculator

Interest on Progress Payments

A construction loan calculator estimates interest on the debt already drawn, increasing the balance as each progress payment reaches the builder. An approved construction limit earns no interest until those funds are drawn.

For each day, this calculator multiplies the drawn balance by the annual interest rate divided by 365. It counts the draw date and excludes the completion date. Leap days count as actual days, with the same 365-day divisor.

The monthly table adds those daily amounts within each calendar month. The stage table attributes interest to the land balance and each drawdown from its payment date to completion. Interest stays outside the loan balance because this model assumes you pay it separately.

ANZ's construction loan explanation describes progressive drawdowns and interest on the funds used. CommBank explains daily interest using a 365-day divisor, including leap years. This tool adopts that convention. A lender's billing cycle, rounding and contract can produce different payments.

For land and construction, enter the existing land debt first. Land equity itself creates no interest charge. If you own the land outright, use $0 for the land balance and enter only the construction borrowing.

A Construction Repayment Example

The starting example produces $12,703 in build interest on a $250,000 land loan and $350,000 of staged construction borrowing at 6%. Completion follows six calendar months after interest starts.

In this hypothetical schedule, the first $75,000 draw occurs after 14 days. The first month has 31 days, so the land balance accrues interest for 31 days and that draw for 17 days. That month's interest is $1,483.56.

The model retains unrounded interest until display, so adding rounded rows can differ from the unrounded total by a cent. Change the draw amounts and dates to match the building contract. Leave unused drawdowns at zero.

The same drawn-balance arithmetic can estimate interest for a knock-down rebuild or an owner-builder project. It does not decide eligibility, acceptable security or a lender's progress-payment conditions. For business construction lending, separate fees, capitalised interest and development-finance facilities need their own cash-flow model.

What a Building Delay Costs

A building delay adds interest when existing debt stays outstanding for longer. The delay option moves your selected drawdown, every later drawdown and completion by the same number of days.

At the starting settings, choose drawdown 3 and enter a 30-day delay. Build interest rises from $12,703 to $14,799, adding $2,096. The $425,000 drawn before that stage remains outstanding for 30 extra days.

The principal-and-interest switch moves 30 days later, as the result dates show. Later drawdowns move too, so the tool does not charge the full $600,000 for the entire delay. It keeps the rate and repayment term unchanged.

For a delay that leaves payment dates unchanged, edit completion directly instead. An extension of the interest-only period needs lender agreement. The estimate excludes extra rent, builder variations and extension fees.

Repayments After Completion

After the interest-only period, the calculator repays the drawn balance through monthly principal-and-interest payments over your entered remaining term. The starting $600,000 balance at 6% over 29 years gives $3,642.03 a month.

The repayment uses the annual rate divided by 12 and 348 monthly payments. It pays down principal as well as interest. During construction, each payment covers only the modelled interest and leaves the amount borrowed unchanged.

Use the remaining term available when repayments switch, excluding any elapsed term your contract counts during construction. If a fixed maturity date leaves less time after a delay, reduce that term. This tool holds the entered repayment term constant in its delay comparison.

The extra interest-only months field extends interest accrual after completion before principal repayments start. The total through that period appears separately from build interest. It assumes the fully drawn debt remains unchanged throughout those extra months.

CommBank's construction loan information says the final progress payment triggers the repayment arrangement chosen at origination and starts its contracted term. That illustrates why the contract determines when the term starts. Enter the term for your own facility instead of assuming every lender counts construction months alike.