Building a dream home is an exciting journey, but it’s also a process that requires careful financial planning. One of the most critical aspects of this planning involves understanding and managing construction loans.

The purpose of this post is to explain construction financing. Highlighting,

  • What are construction loans and types?
  • How it works and the formula for interest rate calculation
  • Loan Recruitments
  • You are also provided with a construction loan calculator.

Construction loan calculator

Use this mortgage loan calculator to find your monthly payments and total loan cost by setting your data like interest rate, balloon amount, and the number of installments.


Step 1: Enter your Loan Amount
Step 2: No. of Payments

Step 3: Payment Mode
Step 4: Interest Rate

Step 5: Balloon Amount

Ezraloans Calculator



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Application fee


Monthly fee


Total regular fees


Total fees


About this Construction Loan Calculator

This Construction Loan Calculator from Ezraloans serves as a practical tool for estimating construction loans. It simplifies the process by allowing you to input key loan details such as the loan amount, interest rate, payment frequency, and more. The calculator provides a repayment chart and an amortization table to visualize the loan’s repayment schedule.

Note: The results generated are estimates and not official loan quotes. Different lenders might use distinct formulas, and interest rates can vary. While this calculator offers an approximation of your construction loan, it’s advisable to consult lenders directly for precise details and specific offers tailored to your circumstances.

What is a Construction Loan?

Construction loan

A construction loan helps us pay for building a house from the very start to its finished. There are two main types, one just covers building costs, while the other turns into a mortgage after the house is done. Compared to standard house loans, these loans usually have higher interest rates and need a larger down payment.

When you apply for a construction loan, you’ll need to show the lender your plan for building, a timeline, and a detailed budget. Then, the lender gives money to the builder in different stages as the work progresses.

Types of Construction Loans

1. Stand-Alone Construction Loans: This kind requires two loans: one for building and another for a mortgage once the house is constructed. There are two different sets of closing charges.

2. Construction-to-Permanent Loans: With this simpler alternative, there is only one loan that includes both the mortgage and the construction loan, so there is only one set of closing expenses.

Recruitment of Construction loan

To get a construction loan for a commercial building or houses, you’ll need to show the lender a detailed plan of your project, you have to show that you have enough money to cover the costs, and have a decent credit score, usually 600 or more.

You’ll also need to give an detail of how long the construction will take and how much it will cost.

Once you’re approved, the lender gives money to the contractor in stages as the work progresses. Compared to standard house loans, commercial building loans typically have higher interest rates and need a larger down payment.

Interest rate for a construction loan

Construction loan interests

The interest rate for a construction loan can change based on the

  • lender,
  • your credit score,
  • And the type of loan you get.

 Normally, construction loan rates are around 1 percentage point higher than regular mortgage rates.

Remember, these loans usually ask for more money upfront and have higher interest rates compared to regular home loans.

Formulas for Interest Calculation

Interest-Only: (Loan amount x Interest rate) / 12 equals monthly interest.


This article serves as a thorough guide in understanding and managing construction loans for building a home. Covering various crucial aspects, it explains the numbers of construction financing, distinguishing between standalone and construction-to-permanent loans while highlighting their higher interest rates and increased down payment requirements compared to traditional house loans.

The article introduces the Ezraloans Construction Loan Calculator, emphasizing its utility in estimating loan details but cautions that its results are estimations, advising direct consultation with lenders for precise information.

In addition, it discusses shifts in interest rates, lists the requirements for obtaining a construction loan, and offers an interest calculation method, giving you a thorough understanding of navigating the complexity of construction financing to realize their dream homes.

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