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Construction loan calculator

Construction lends against cost, not against what the finished building will be worth. Enter the budget and see the total project cost, the loan a lender will advance at your loan to cost, the equity you have to bring, the carrying cost across the build and the statutory holdback sitting outside all of it.

Your project

Land value or cost

Hard costs

Construction contract, site works and materials

Soft costs

Design, permits, fees, marketing and professional costs

Contingency (% of hard costs)

Loan to cost (%)

Interest rate (%)

Illustrative, edit to your quote

Construction period (months)

Maximum loan at 70% of cost

$6,860,000

Sized on cost, not value

Contingency amount: $600,000
Total project cost: $9,800,000
Equity required: $2,940,000
Estimated interest during construction: $437,325
Total capital if interest is paid in cash: $3,377,325
BC statutory holdback on hard costs: $600,000

Interest is an estimate. It assumes roughly half the loan is outstanding on average across the term, because a construction facility draws progressively rather than funding on day one.

Building rental? Score the project on MLI Select to see what the insured takeout is worth.

What the interest figure assumes

The interest number is an estimate and it is modelled on the average outstanding balance, not the full loan. A construction facility advances progressively as work is completed and verified, so the balance starts near zero and reaches the full amount only at the end. We assume roughly half the loan is outstanding across the term, which is the standard approximation: loan multiplied by the rate, multiplied by months divided by twelve, multiplied by 0.5.

Most construction facilities capitalise the interest reserve into the loan rather than requiring it in cash. Where that applies, the interest is funded by the facility and the equity figure is the number that matters to your cash planning. Where the lender requires interest served monthly, add it to your equity to get total capital required. The calculator shows both.

The BC statutory holdback

The Builders Lien Act requires a statutory holdback of 10 percent on the value of work and materials. The calculator applies it to hard costs. Every advance arrives net of holdback, the accumulated amount lands near the end of the job, and it is normally released at day 55 after substantial completion following a clear title search.

Treat it as real money out of the project for months. Your trades are managing the same constraint on their side, and a schedule that assumes holdback is available cash will run short exactly when the project is most exposed. How construction draws work covers the mechanics of each advance.

Why construction lends on cost rather than value

On a completed building the lender can see income and value. On a hole in the ground it can see neither, so it lends against what the project costs and tests that cost against an independent quantity surveyor's budget. Loan to cost is the ceiling. A completed value test still exists, usually as a loan to value cap on the finished project, but cost is the binding constraint through the build.

That is also why budget quality matters more than optimism. A cost to complete discipline runs through the whole facility: at every draw the lender checks that the undrawn balance plus your remaining equity is still enough to finish. If it is not, the draws stop until you top up the shortfall.

Equity goes in first

Construction lenders almost always require your equity spent before the first advance, or at minimum spent in proportion ahead of the loan. Land held free of debt normally counts toward it, which is why a developer who bought the site years ago can be much closer to funding than the loan to cost percentage alone suggests.

Plan the cash accordingly. Design, permits, servicing and site preparation are spent long before a facility funds, and those costs are exactly the ones a lender expects to see already paid. Construction financing covers the full structure.

What the lender wants before the first draw

A building permit in hand, not in process.
A fixed price or guaranteed maximum price contract with a qualified builder.
A quantity surveyor appointed and the opening cost report delivered.
Course of construction insurance and liability coverage in place.
Equity verifiably spent, with invoices and proof of payment.
A credible exit: an insured takeout, a term lender or presales.

The deal submission checklist sets out the documents in full.

FAQ

Construction financing questions

Usually not. Most construction facilities capitalise an interest reserve into the loan, so interest accrues and is funded by the facility rather than paid monthly out of pocket. If that applies to your file, the equity figure is the number that matters and the interest estimate simply tells you how much of the facility is consumed by carrying cost rather than by construction.

Because a construction facility does not fund on day one. It advances progressively as work is verified, so the outstanding balance climbs from near zero at the start to the full amount at completion. Averaging roughly half the loan across the term is the standard approximation. It is an estimate, not a schedule, and the real figure depends on how fast the draws come.

Under the Builders Lien Act, 10 percent of the value of work and materials is held back from payments and released 55 days after substantial completion, following a clear title search. It protects against trade liens. In cash flow terms it is real money out of the project for months, so it must never be treated as available funds.

Often yes. If the land is owned free of debt, its value counts toward your equity contribution, which is one reason land that has appreciated since purchase can carry a large part of the equity requirement. Lenders will normally use the lower of cost and appraised value, and land acquired very recently is usually held at cost.

Keep reading

Before you submit a build

All calculatorsFour free tools for sizing loans, scoring MLI Select and testing a build budget.Construction financingThe full structure: cost to complete, draws, holdback and takeout.How draws workWhat each advance requires and why draws stall.Submission checklistEvery document a lender needs to underwrite the file.MLI Select new buildConstruction loan plus insured takeout on ground up rental.Bridge and landHolding a site through rezoning, permits and pre construction.

Have a project budget?

Send the pro forma and the cost plan. We will tell you what a lender advances against it and where the equity has to land.

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