How much interest will you pay during the build?
Lenders quote a construction-loan rate but rarely tell you the actual dollar interest you'll pay over a 9–12 month build. You only pay interest on the money drawn down so far at each stage — far less than a fully drawn loan, but still a real number. This calculator works it out stage by stage.
Your numbers
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How we got this
Working out the math…
The construction interest you weren't told about
Construction loans work differently from standard home loans. The lender doesn't hand you the full loan at settlement; they release it in stages tied to building milestones. Your builder's progress claims trigger each drawdown. The good news: you only pay interest on what's been drawn. The less-good news: by the lockup stage you're paying interest on roughly two-thirds of the loan, and it adds up.
On a $600,000 build at 6.5% over 9 months, you'll pay around $17,000 in construction-phase interest before you even move in. The same loan fully drawn day 1 would have cost $29,250 in 9 months — so progress drawdown saves about $12,000. That saving is the strongest financial case for staying with a true construction loan vs an equity-release-from-existing-equity approach.
What this calculator doesn't model
- Lender-specific drawdown fees. $300-500 per stage typical, charged on top of standard fees. Adds $1,800-3,000 over a 6-stage build.
- Valuation fees at progress claims. Some lenders re-value at each stage ($300-500 each); others only at completion. Varies by lender and build size.
- Stage timing variance. Real builds have stage overlap and unequal duration. We spread evenly for planning purposes.
- Contingency reserve. Many lenders require 5-10% of the loan held in reserve. Reduces your effective drawn balance during construction but doesn't materially change interest math.
- Post-handover conversion. Construction loan typically converts to standard P&I on completion at the lender's then-current variable rate — that revert math is its own conversation.