Construction Loan to Permanent Calculator 2026
Construction loans finance home builds in stages (typically 5 draws). Interest-only on outstanding balance during construction (6-18 months). Most convert to permanent 30-year mortgage at completion. This tool models all-in cost vs paying cash from savings.
Construction Loan Mechanics
Lender funds in 5-8 draws as construction milestones complete: (1) Foundation. (2) Framing. (3) Mechanicals (HVAC, plumbing, electrical). (4) Drywall + interior. (5) Final inspection / certificate of occupancy. Inspections required between draws. Interest-only on outstanding draw balance during construction phase.
Contingency Reserve Standards
NAHB construction cost data 2025: 15-25% of original budget overrun is typical. Lenders require 10-15% contingency reserve as part of loan. Always plan personal cash buffer above lender requirement. Major drivers: material price volatility, permit delays, weather, scope creep, subcontractor change orders.
Soft Costs Often Forgotten
Hard costs (materials, labor) are budgeted carefully. Soft costs frequently underestimated: architect/design (5-15% of build), permits + impact fees (1-5%), construction-period insurance (0.5-1.5%), interim utilities, surveys, geotech reports, builders risk insurance, lender fees, title insurance, recording fees. Add 8-15% on top of hard costs.
Source: NAHB Cost of Constructing a Home 2025, FRED Construction Cost Index. Last updated: May 2026.