Construction Loan Calculator
Free construction loan calculator: enter the total project cost, loan-to-cost, interest rate, and construction term to get the loan amount, the borrower equity required, and an estimated interest reserve. Built for developers, sponsors, and construction lenders.
How a construction loan is sized
A construction loan is sized against the project budget through loan-to-cost, and against the finished value through loan-to-value, with the lender advancing to the more conservative of the two. Because the loan is drawn in stages and the property earns no income during the build, it usually carries an interest reserve to cover interest until completion. For how the draw process, retainage, and reserve work, see construction lending explained and commercial real estate lending. To test the take-out loan on the finished property, use the CRE loan sizing calculator.
Frequently asked questions
What is loan-to-cost (LTC)?
Loan-to-cost is the construction loan amount as a percentage of total project cost, including land, hard costs, and soft costs. A 75 percent LTC on a 5,000,000 dollar project is a 3,750,000 dollar loan, leaving 1,250,000 dollars of borrower equity.
How is the interest reserve estimated?
Because a construction loan is drawn in stages, the balance ramps up over the term. A common estimate sets the interest reserve at roughly half the interest on the fully drawn loan, reflecting an average balance near 50 percent. A lender sizing the actual reserve models the specific draw schedule.
What is the difference between loan-to-cost and loan-to-value?
Loan-to-cost measures the loan against what the project costs to build; loan-to-value measures it against the appraised value of the finished project. Construction lenders test both and lend to the more conservative result.
How much equity does a construction loan require?
Borrower equity is total project cost minus the loan amount, so it follows from the LTC. At 75 percent LTC the borrower funds 25 percent, and lenders usually require that equity to go in first, before the loan advances.
Estimate only, not a quote. Behind every construction loan is draw administration, inspections, and reserve monitoring, which Zolvo automates on top of the systems lenders already run.