Construction Loan Calculator

Progress Draws and Interest

A construction loan charges interest only on the money drawn so far, not the full approved limit. Each progress draw adds to the balance from its draw date. ANZ's construction loans handbook says interest is calculated daily on the balance owing and charged monthly.

Suppose $100,000 is drawn at the loan start at 6% on a 365-day basis. A second draw of $50,000 arrives 31 days later, and the loan converts 28 days after that. Interest is $100,000 × 6% × 31 ÷ 365 = $509.59 for the first month. The second month adds $150,000 × 6% × 28 ÷ 365 = $690.41, for exactly $1,200.00 in total.

A later draw shortens the days that money is charged interest. In the starting example, moving every progress draw 30 days later cuts construction interest from $17,667.50 to $15,477.09. A draw on the conversion date joins the final balance but earns no construction interest. The calculator rejects a draw after the conversion date, so move the draw or the conversion date to match the build.

A business construction loan calculator uses the same arithmetic. Enter the facility's draws, rate and day-count basis, choosing 360 days when the loan agreement uses it. The result estimates interest and cash flow only. Commercial credit approval, security and loan conditions remain the lender's assessment. For deposit, LVR and evidence rules, read the construction loan lender policy guide.

Land Equity and Funds to Complete

Land equity is the land value less the debt secured on it. A lender can count it as security for the loan, but it pays no builder invoice. The calculator therefore shows land equity apart from the funds that pay for the build.

Funds available to complete are the approved construction lending plus the borrower's own cash. When construction costs exceed those funds, the difference is a cash shortfall the borrower must cover. ANZ's handbook asks borrowers who contribute their own funds to spend that cash before ANZ makes the first drawdown.

In the starting example, land worth $400,000.00 carries $150,000.00 of debt, leaving $250,000.00 of equity. Construction costs of $520,000.00 against $450,000.00 of approved lending and $50,000.00 of cash leave a $20,000.00 shortfall. The land equity does not reduce that shortfall.

The funding card also compares the entered draws with the approved lending. Draws above the approved amount show as an excess, which signals that the draw schedule or the loan approval needs to change. For how land and construction loans are structured, see construction finance in Australia.

Moving to Principal and Interest

Once the final progress payment is made, the loan switches to the repayment type chosen at origination, usually principal and interest. The calculator applies the standard repayment formula to the balance at conversion. It uses the remaining term you enter and the rate in force on the conversion date.

Paying interest monthly keeps the converted balance at the drawn total plus any land debt included in the loan. Capitalising interest adds each month's charge to the balance on its charge date, so later interest is charged on earlier interest. In the starting example, paid interest totals $17,667.50 and the loan converts at $600,000.00, with monthly repayments of $3,772.70.

Capitalised interest in the same example totals $17,948.34. The loan converts at $617,948.34, and monthly repayments rise to $3,885.56. Capitalising removes the monthly interest payments during the build but adds to every repayment afterwards.

Moneysmart explains that repayments rise when an interest-only period ends. Here, the highest monthly interest payment during the build is $3,149.90, against $3,772.70 a month after conversion. Test the borrower's budget against the converted repayment as well as the build-period interest.

Progressive drawing fees are separate from interest. CommBank adds its progressive drawing fees to the home loan after the final payment. To include such fees in the converted balance, add them to the final draw amount.