Construction Loan Interest Calculator – Draw Schedule & Per Diem

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The sample values calculate automatically. Change any input to evaluate your own scenario.

Construction loan agreements vary. Some lenders capitalize interest, charge inspection or draw fees, use monthly average balances, limit re-advances, or calculate unused-line fees differently. This page models simple daily interest on outstanding principal.

Draw-based interest

Measure the cost of money only while it is actually outstanding

A construction commitment may be large, but the entire commitment is usually not advanced on the first day. This calculator therefore divides the loan into date intervals and uses the outstanding balance that existed during each interval.

Interval interest = Outstanding principal × Annual rate × Days ÷ Basis

The same interval method is used for an optional unused-commitment fee, except the base is the undrawn amount instead of the outstanding principal.

Average outstanding balance

The calculator also computes a day-weighted average balance. That is useful for understanding how much of the commitment was actually in use during the period rather than looking only at the final balance.

Need a standard amortization schedule after construction?

When the construction phase converts into a permanent amortizing loan, use Amortization Pro to create the full principal-and-interest schedule.

View Amortization Pro Buy for $49

More ways to use this calculator

Common calculation questions this page answers

Construction Loan Draw Calculator

Construction interest is commonly based on principal actually advanced rather than the full commitment from day one. Enter each draw on its actual date so the calculator can use the balance outstanding during each interval.

Interest on Construction Loan Draws

Each draw increases principal for later interest periods. A principal repayment reduces the balance for later periods. The interval method makes the interest traceable draw by draw.

Construction Loan Per Diem Interest

The current per diem is the interest that accrues for one day on the current outstanding principal. Every new draw or principal repayment changes that daily amount.

Unused Commitment Fee

Some construction loans charge a separate annual fee on the undrawn portion of the commitment. If the agreement includes that fee, enter the rate to estimate it over the same dated intervals.

For the underlying daily-rate math, see the Daily Interest & Per Diem Calculator. When construction converts to a standard amortizing loan, use Amortization Pro.

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Frequently asked questions

How is interest calculated on a construction loan?

Interest is commonly calculated on the principal actually outstanding during each date interval, rather than on the entire commitment from the beginning.

Do I pay interest on the entire construction loan amount?

Not always. Many construction loans charge interest on amounts already advanced, but the governing loan documents determine the actual method.

When does interest begin on a construction draw?

The draw affects interest from the transaction date according to the loan day-count and posting rules. This calculator applies a draw after interest for the preceding interval is calculated.

How do principal repayments affect construction interest?

A principal repayment reduces the outstanding balance used for later daily-interest intervals.

What is an unused commitment fee?

It is a separate fee some agreements charge on the portion of the committed loan amount that has not yet been advanced.

How is construction loan per diem calculated?

Multiply the current outstanding principal by the annual interest rate and divide by the required day-count basis.

Can construction interest use Actual/360?

Yes, if the loan agreement uses that convention. Actual/360 uses actual elapsed days with the annual rate divided by 360.