Calculators → Construction draw interest
A construction loan does not charge interest on the whole commitment. Money is drawn as the job progresses, so you pay on a balance that climbs month by month — which is why quoting the rate against the full loan overstates the cost, often by close to half.
What the same loan would cost if the whole commitment were outstanding for the entire job.
The full Spec Home Evaluator shows every month of the job — each draw, the running balance, interest capitalised into it, and the equity you have to put up before the lender funds anything.
Open the full model freeNo credit card. One saved project on the free plan.
With a mortgage you receive the money once and pay interest on all of it from day one. A construction loan works the other way: the lender funds against progress, so the balance starts near zero and climbs as the house goes up. You pay interest only on what has actually been advanced.
Across a typical build the average outstanding balance lands somewhere near half the commitment, so the real interest cost is roughly half what the headline rate against the full loan implies. The comparison above shows the gap on your own numbers.
Most construction lenders require the borrower's equity to be spent before they fund a dollar — and the land usually counts towards it. That is why the equity you still need figure matters more than the loan-to-cost ratio: a 75% LTC loan does not mean you only need 25% in cash on day one. This calculator follows that convention: equity draws first, then the loan.
Three things sit on top. The commitment is sized against land plus build cost; the loan then also funds your monthly carry, and the origination fee and interest are capitalised — added to the balance rather than paid as you go. Add those together and the balance repaid at sale finishes above the headline commitment.
Real lenders usually size the commitment to include an interest and carry reserve, so the two figures reconcile on a term sheet. If yours quotes a hard cap, compare it with the peak loan balance above rather than the commitment — that is the number that has to fit.
On a spec build you rarely write a cheque for interest each month. It is added to the loan balance, which then accrues interest itself, and the whole thing is repaid at sale. That compounding is included here. It also means a delay costs more than the simple monthly figure suggests, because the interest on the delay accrues interest too.
This is a calculation tool, not advice. Every result depends entirely on the assumptions you enter — verify them before acting on a deal.