Construction Loan Draw Schedule Calculator
Draw Schedule
| Milestone | Month | Draw | Retainage | Net | Balance | Interest |
|---|---|---|---|---|---|---|
| Foundation | 3 | $100,000.00 | $10,000.00 | $90,000.00 | $90,000.00 | $1,800.00 |
| Framing | 6 | $150,000.00 | $15,000.00 | $135,000.00 | $225,000.00 | $4,500.00 |
| Mechanical | 9 | $150,000.00 | $15,000.00 | $135,000.00 | $360,000.00 | $7,200.00 |
| Finish | 12 | $100,000.00 | $10,000.00 | $90,000.00 | $450,000.00 | $3,000.00 |
This construction loan calculator models a draw-based building loan, where funds are released in milestone draws rather than all at once and interest accrues only on the balance actually disbursed. You define the loan amount, annual rate, construction duration, retainage holdback, and a set of draws by percentage; the tool spreads the draws evenly across the schedule and accumulates interest period by period. The result shows interest during construction, total financing cost, and the retainage to be released at completion.
Formula
Interest_period = Outstanding_balance × (annual_rate ÷ 12 ÷ 100) × months_at_balance
- Outstanding_balance
- Cumulative net disbursements (draws less retainage) to date
- annual_rate
- Annual interest rate as a percentage
- months_at_balance
- Number of months the balance is held before the next draw
- Interest_period
- Interest accrued during that segment of the schedule
How it works
- Enter the total loan amount, annual interest rate, construction duration in months, and the retainage holdback percentage (default 10%). Add draw milestones, each with a percentage of the loan; the calculator normalizes them so they sum to 100%.
- Draws are spread evenly across the construction period, and from each draw a retainage portion is withheld so the net disbursement is what increases the outstanding balance.
- Interest for each period is the outstanding balance times the monthly rate times the number of months at that balance, summed across the schedule. The tool reports total interest during construction, total cost including interest, the retainage release amount, and an effective rate (interest as a percentage of the loan).
Worked example
A $1,000,000 construction loan at 8% annual interest over 12 months with 10% retainage and four equal draws of 25% each.
- Monthly rate = 8 ÷ 12 ÷ 100 = 0.006667; draws land at months 3, 6, 9, and 12.
- Each $250,000 draw withholds $25,000 retainage, so the net disbursement is $225,000, building the balance to $225k, $450k, $675k, then $900k.
- Interest by segment: 225,000 × 0.006667 × 3 = $4,500; 450,000 × 3 = $9,000; 675,000 × 3 = $13,500; 900,000 × 1 = $6,000.
- Sum the segments: 4,500 + 9,000 + 13,500 + 6,000 = $33,000 total interest during construction.
Total interest during construction is about $33,000, total cost is roughly $1,033,000, retainage released at completion is $100,000, and the effective rate is 3.30% of the loan.
Frequently asked questions
- Why is the interest so much lower than a fully drawn loan?
- During construction you only borrow as work progresses, so interest accrues on the rising outstanding balance rather than the full loan from day one. This staged disbursement is why a draw schedule produces far less interest than the headline rate applied to the entire amount for the full term.
- What is retainage and when is it released?
- Retainage is a portion (commonly 5–10%) withheld from each draw as security that work will be completed and corrected. The accumulated retainage — $100,000 on a $1M loan at 10% in the example — is released after final completion and acceptance.
- How does the calculator place the draws in time?
- It spreads the draws evenly across the construction duration, placing each at roughly equal monthly intervals. If you have four draws over 12 months they land near months 3, 6, 9, and 12, and interest is accrued on the balance held during each interval.
- Does this include permanent financing after construction?
- No. The tool focuses on the interest-during-construction phase of a draw loan. The take-out or permanent mortgage that replaces the construction loan at completion should be modeled separately with a standard amortizing mortgage calculator.