Construction Loan Calculator
What is a Construction Loan?
When starting to build a house, you may need to borrow some money from the bank. Construction loans are one of the types of loans that pay for the expenses of building or renovating a home. Usually, these loans are short-term loan that lasts for about 1 year. After the ending of 1 year of construction, the construction loan is converted to a long-term mortgage.
The 1 year time to build the house, the loan is separated into phases, and for each phase, the bank provides the funds to start each phase. When all the phases of construction are completed, the entire loan amount is determined by the costs of each phase and paid back by the time the house is finished. Construction loans are usually riskier and have higher interest rates than mortgages or other loans.
How a the Loan Works
As we described before construction loans provide the amount of money needed for all the costs of building something. These costs include the work stages, materials, and also land if required. If you own land when applying for the loan is a very good starting point because it can be used as collateral.
As a short-term loan that lasts from 12 to 18 months, after the building is finished the loan is converted to a mortgage. Also, sometimes builders take another loan to pay off the construction loan. This method is used to replace the construction loan so the builder has full ownership and can sell it using a more traditional option of financing.
As your home project moves on, funds are provided in phases or referred to as draws. Interest is applied and paid on the amount that is pulled for each drawn. At the end of all the work, the payment process is handed to the contractor separated into parts.
Construction Loan Requirements
- Financial Stability: Borrowers typically need a credit score of at least 680 a low debt-to-income ratio, and sufficient income to qualify.
- Down Payment: A 20% down payment is frequently required by lenders.
- Construction Plan: A detailed plan and construction schedule is necessary.
- Collateral: The completed home will serve as collateral for the mortgage.
How our Construction Loan Calculator Works and How to use it
The whole cost of a building/home project and the monthly payments, including interest, is estimated with the use of our Construction Loan Calculator. Our tools computed each phase’s interest, monthly payment, the total amount plus interest, and also just the interest to pay. We tend to make you understand each phase and the payments that are required.
Your only work to do is to input the necessary inputs to make the right calculations. Below are all the necessary inputs and for each of them a description to have a better understanding.
- Loan Amount: The entire amount you will borrow to fund the project.
- Interest Rate: The percentage applied to the loan amount.
- Repayment (Loan) Term: The time period over which the loan will be repaid.
- Construction (Duration) Stages: The different project stages like footing, framing, finishing, and the approximate amount of money required for each.
We tend to design our tools to be simple and easy to use. Please contact us if you’re looking for a specific calculator tool and are unable to find it. We are happy to help you, create it and share it with everyone. We also have a number of different calculators on our website, and we’re always adding more. Two similar tools that you might find useful are listed below.
Asphalt Calculator
– This tools helps to calculate the amount of asphalt costs and tons needed .