What does building cost you in financing?

Construction-phase interest cost

$15,583

That’s the interest you’ll pay during the 10-month build, on top of the $110,000 down payment. Once construction completes, the loan converts to a regular 6.5% mortgage at $2,781/month.

How construction loans work

Construction-to-permanent (one-close) is the most common structure: one closing covers both the construction loan and the permanent mortgage. Saves a second round of closing costs ($5-10k) vs two-time-close.

Draw schedule: the lender disburses funds in stages as the build progresses (foundation, framing, roof, etc.). You only pay interest on the disbursed balance, not the full loan, so interest costs build up over the construction period.

Interest-only during build: you make small monthly interest payments on the disbursed balance. No principal during construction. The "average balance" assumption above (loan/2) approximates a linear draw schedule.

Conversion to permanent: when construction completes and the home is inspected, the loan automatically converts to your permanent mortgage with regular P&I payments at the locked permanent rate.

Things this calc doesn’t model: draw fees ($150-300 each, can add up), construction loan closing costs (typically 1-2% of loan), inspection fees during draws, contingency reserves (5-10% of build cost is typical), or interest-rate risk on variable construction rate. Always model with a buffer.