Estimated Principal & Interest Payment During Draw Period (Assuming Interest-Only): —
Understanding Commercial Construction Loans
Commercial construction loans are short-term financing solutions specifically designed to fund the building of commercial properties. Unlike traditional real estate loans, these are disbursed in stages (draws) as construction progresses, rather than as a lump sum. This calculator helps you estimate key costs associated with such a loan.
How the Calculator Works
This calculator uses several financial formulas to provide estimates:
Loan Amount: This is the total project cost you enter. The actual loan amount might be slightly less if there are points or origination fees applied to the loan principal.
Upfront Fees: Calculated as a percentage of the total project cost. These fees are typically paid at closing.
Draw Period Payment (Interest-Only): During the construction phase (draw period), many lenders require interest-only payments on the funds drawn to date. This estimate assumes you draw the full loan amount evenly over the draw period and pay interest-only on that amount. The formula used is:
Draw Period Payment = (Loan Amount / Draw Period Months) * (Annual Interest Rate / 12) Note: This is a simplified assumption. Actual interest-only payments will fluctuate based on the actual disbursement schedule.
Monthly Payment (Principal & Interest): After construction is complete and the loan converts to a standard repayment term, this estimates the fixed monthly payment. This is calculated using the standard annuity formula for loan payments:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1] Where:
M = Monthly Payment
P = Principal Loan Amount (Loan Amount – Fees Paid)
i = Monthly Interest Rate (Annual Interest Rate / 12)
n = Total Number of Payments (Loan Term in Months)
Total Interest Paid: The sum of all interest payments over the life of the loan. Calculated as:
Total Interest = (Monthly Payment * Loan Term in Months) - Principal Loan Amount
Total Loan Cost: The sum of the principal paid, total interest paid, and upfront fees.
Total Loan Cost = Principal Loan Amount + Total Interest Paid + Upfront Fees Paid
Key Considerations for Commercial Construction Loans
Commercial construction loans are complex and often come with specific terms:
Interest Rates: Can be fixed or variable, often higher than permanent financing due to increased risk.
Fees: Lenders may charge origination fees, processing fees, inspection fees, and others.
Disbursement Schedule: Funds are released in draws upon completion of specific construction milestones, verified by inspections.
Lender Requirements: Lenders will require detailed project plans, budgets, permits, and contractor information.
Conversion to Permanent Financing: Often, a construction loan is a temporary bridge to a long-term mortgage (permanent financing) once construction is complete and the property is stabilized.
Use this calculator as a preliminary tool to understand potential costs. Always consult with your lender for precise figures and terms specific to your project.
function calculateLoan() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var loanTermMonths = parseInt(document.getElementById("loanTermMonths").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanFeesPercent = parseFloat(document.getElementById("loanFeesPercent").value);
var drawPeriodMonths = parseInt(document.getElementById("drawPeriodMonths").value);
var monthlyPayment = 0;
var totalInterest = 0;
var totalLoanCost = 0;
var feesPaid = 0;
var drawPeriodPayment = 0;
// Input validation
if (isNaN(loanAmount) || loanAmount <= 0 ||
isNaN(loanTermMonths) || loanTermMonths <= 0 ||
isNaN(interestRate) || interestRate < 0 ||
isNaN(loanFeesPercent) || loanFeesPercent < 0 ||
isNaN(drawPeriodMonths) || drawPeriodMonths loanTermMonths) {
alert("Draw Period cannot be longer than the Loan Term.");
return;
}
// Calculate upfront fees
feesPaid = loanAmount * (loanFeesPercent / 100);
// Calculate principal amount after fees (if fees are deducted from loan)
// For simplicity, we'll assume fees are paid out of pocket or separate,
// but the total loan cost will include them.
// If fees reduce the principal, uncomment and adjust:
// var principal = loanAmount – feesPaid;
var principal = loanAmount; // Assuming loanAmount is the total funding needed and fees are separate cost
// — Calculations for Draw Period (Interest-Only) —
var monthlyInterestRateDraw = (interestRate / 100) / 12;
if (drawPeriodMonths > 0) {
// Simple estimation: assume interest on the full loan amount is paid
// A more accurate calculation would be based on actual draws.
drawPeriodPayment = loanAmount * monthlyInterestRateDraw;
}
// — Calculations for Repayment Period (Principal & Interest) —
var monthlyInterestRateRepay = (interestRate / 100) / 12;
var numberOfPayments = loanTermMonths;
if (principal > 0 && monthlyInterestRateRepay > 0 && numberOfPayments > 0) {
monthlyPayment = principal * (monthlyInterestRateRepay * Math.pow(1 + monthlyInterestRateRepay, numberOfPayments)) / (Math.pow(1 + monthlyInterestRateRepay, numberOfPayments) – 1);
totalInterest = (monthlyPayment * numberOfPayments) – principal;
} else if (principal > 0 && monthlyInterestRateRepay === 0) { // Handle 0% interest
monthlyPayment = principal / numberOfPayments;
totalInterest = 0;
} else if (principal > 0 && numberOfPayments === 0) { // Handle 0 term (unlikely for construction)
monthlyPayment = principal; // Paid in full immediately
totalInterest = 0;
} else {
monthlyPayment = 0;
totalInterest = 0;
}
// — Total Loan Cost —
totalLoanCost = loanAmount + totalInterest + feesPaid; // Includes initial loan amount, all interest, and fees paid
// Display results
document.getElementById("monthlyPayment").textContent = monthlyPayment.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
document.getElementById("totalInterest").textContent = totalInterest.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
document.getElementById("totalLoanCost").textContent = totalLoanCost.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
document.getElementById("feesPaid").textContent = feesPaid.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
document.getElementById("drawPeriodPayment").textContent = drawPeriodPayment.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
}