Construction Loan Interest Calculation

Interest on a construction loan is a very simple formula that anyone can calculate. If your current interest rate is 7.75% you simply take the balance that has been drawn or borrowed. You then multiply this balance by .0775. Then take that number and multiply it by 12 ( 12 months in a year ). This is your monthly interest only payment.

Once construction is complete the loan will then be modified ( if this is a construction to perm financing product ) ... Once modified you will have a fixed payment based on principle and interest. At time of modification you will be able to pay down the construction loan ( if you are utilizing equity from a pending sale or other source ) or you can float your interest rate down to market conditions ( if you selected a float down option ).