Short answer: a construction loan is commonly the lower of a loan-to-cost limit (about 80–90% of land, hard and soft costs for investors) and a cap on the completed value (about 65–75% for investors, higher for owner-occupied construction-to-permanent loans). Interest is usually charged only on money drawn, so the average balance during the build is often about half the loan.
Run your construction numbers
Pick investor or owner-occupied; switching resets the loan-to-cost, value cap and rate to that mode's typical defaults. The defaults show a $100,000 lot, $350,000 of hard costs, $50,000 of soft costs and a $700,000 completed value.
Typical ranges only. Construction limits, rates and fees vary by lender, program, experience, builder and market.
How each input works
Land
Enter the purchase price if you are buying the lot. If you already own it, tick the box and enter its current value; that value counts toward your equity, less any land loan the construction loan must pay off. Some lenders credit land at what you paid until it has been owned for a while.
Hard costs, soft costs and contingency
Hard costs are the builder's contract: labor and materials. Soft costs are plans, engineering, permits and fees. Lenders commonly want a contingency of 5–10% of hard costs inside the budget.
Loan-to-cost and the completed-value cap
Investor programs commonly lend about 80–90% of total cost, capped at about 65–75% of the as-completed value. Owner-occupied construction-to-permanent loans size on the lesser of cost or value and can reach about 90% or more, depending on the program.
Rate, months and average draw
Construction interest is usually interest-only on funds drawn. The default rates are illustrations. If draws build evenly, the average balance is about half the loan; 55% allows for a heavier start.
How the calculator works it out
- Total cost = land + hard costs + soft costs + contingency (contingency % × hard costs). Owned land is counted at its value.
- Loan = the lower of total cost × loan-to-cost % and completed value × value-cap %. The results say which limit binds.
- Your cash equity = total cost − loan, less any land equity (land value − land loan payoff).
- Construction interest ≈ loan × average % drawn × rate × months ÷ 12. Points = loan × points %.
- Investor: profit if sold = completed value − total cost − interest − points − 6% selling costs. Refinance = 75% of completed value, as a DSCR loan might allow, minus the construction payoff.
- Owner: the construction loan converts to a fully amortizing loan at the permanent rate and term.
Worked example: the default investor build
Illustrative assumptions, not a quote: 85% loan-to-cost, a 75% value cap, 9.5% for 12 months with 55% drawn on average, and 1.5 points.
| Contingency: 10% × $350,000 | $35,000 |
| Total cost: $100,000 + $350,000 + $50,000 + $35,000 | $535,000 |
| Loan-to-cost limit: 85% × $535,000 | $454,750 |
| Value limit: 75% × $700,000 | $525,000 |
| Construction loan (loan-to-cost binds) | $454,750 |
| Your cash equity: $535,000 − $454,750 | $80,250 |
| Points: 1.5% × $454,750 | $6,821 |
| Interest: $454,750 × 55% = $250,113 average × 9.5% × 12 ÷ 12 | $23,761 |
| Cash needed in total: $80,250 + $6,821 + $23,761 | $110,832 |
| Profit if sold: $700,000 − $535,000 − $23,761 − $6,821 − $42,000 selling | $92,418 |
| Refinance at 75%: $525,000 − $454,750 construction payoff = cash back | $70,250 |
| Equity left after refinancing: $700,000 − $525,000 | $175,000 |
If you already owned the lot free and clear at $100,000, its equity would cover the $80,250 required, so you would need about $30,582 for points and interest instead of $110,832.
Building a home to live in
Switch to Build to live in and the defaults become 90% loan-to-cost, a 90% value cap and an illustrative 8% construction rate. On the same project the loan is $481,500 (90% × $535,000), your equity is $53,500, construction interest is about $21,186 and points about $7,223. After conversion, $481,500 at an illustrative 6.75% over 30 years is about $3,123 a month in principal and interest, before taxes, insurance and any mortgage insurance. Conventional, FHA, VA and USDA construction-to-permanent programs each set their own down payment and construction-period rules.
Planning a build?
Share the land, budget, builder and expected value. LoanFight reviews the project and connects you with a lending partner whose construction program fits it.
Tell Us About Your Deal →What the calculator leaves out
It does not include closing costs beyond points, appraisal and draw-inspection fees, an interest reserve, builder's risk insurance, property taxes during the build, extension fees, overruns beyond contingency, refinance closing costs or mortgage insurance. Investor builds are generally business-purpose credit; a home you will live in is consumer credit with its own underwriting.
New construction calculator FAQs
How much can I borrow for a new construction loan?
Investor construction loans commonly lend about 80–90% of total project cost, capped at about 65–75% of the completed value. Owner-occupied construction-to-permanent loans can go higher, often around 90% or more of cost depending on the program. Whichever limit is lower sets the loan.
Does land I already own count as a down payment?
Often, yes. Lenders commonly count the land's value, less any loan you owe on it, toward the equity required, subject to the appraisal and the lender's rules. Some lenders credit land at its purchase price until it has been owned for a while.
How is interest calculated during construction?
Usually interest-only on the money drawn so far. Because draws start small and build up, the average balance is often around half the loan. The calculator multiplies the loan by your average-drawn percentage, the rate and the months.
Is contingency part of the loan?
Many lenders require a contingency line, commonly 5–10% of hard costs, and include it in the budget they finance. Overruns beyond it usually come from the borrower, because lenders rarely raise the loan.
What happens when construction ends?
An investor sells the home or refinances into long-term rental debt such as a DSCR loan. On a one-close construction-to-permanent loan the balance converts to a regular mortgage with principal and interest payments; a two-close loan is refinanced into a new mortgage.
Does LoanFight make construction loans?
No. LoanFight is not a lender. We review the project and connect you with a lending partner whose construction program fits it. The partner sets the actual terms.
Sources
- CFPB: Regulation Z, 12 CFR 1026.3(a) — investor builds are generally business-purpose credit, exempt from most consumer mortgage rules.
- Fannie Mae Selling Guide B5-3.1-02 — conventional single-closing construction-to-permanent loans.
- HUD Single Family Housing Policy Handbook 4000.1 — FHA construction-to-permanent rules.
- VA Lenders Handbook (VA Pamphlet 26-7) — VA home loan program rules.
Educational estimate only. LoanFight is not a lender, does not make credit decisions and does not set loan terms. The default rates, points and limits are illustrations of common ranges, not a quote. Your lending partner will provide the actual terms.