How construction loan monthly payments are calculated
Principal, rate and term — that is all it takes. The monthly payment comes from the amortisation formula: payment = principal x r(1+r)^n / ((1+r)^n – 1), with r the monthly rate and n the number of payments. Your down payment is taken off the loan amount first, so it lowers the amount borrowed and the payment.
For example, a $300,000 loan at 6% over 30 years costs $1,798.65 per month. A $320,000 loan at 6.5% over 30 years costs $2,022.62 per month, and a $200,000 loan at 7% over 15 years costs $1,797.66 per month.
Remember the payment shown here covers principal and interest only — taxes, insurance and lender fees are extra. Use the how much can I borrow calculator to work backwards from a monthly budget, or the full construction loan calculator for both directions.