Construction to Permanent Loan Calculator
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Construction to Permanent Loan Calculator
Estimated Results
Enter loan details to see your estimated monthly payments.
Understanding Construction to Permanent Loans
A Construction to Permanent (C2P) loan is a unique type of financing that bundles the construction phase of a new home with the permanent mortgage. Instead of obtaining a separate construction loan and then refinancing into a permanent mortgage, a C2P loan allows you to do both with a single closing. This streamlines the process and can save you time and money.
How it Works:
Initially, the loan funds are disbursed in draws to cover construction costs. During this period, you typically only pay interest on the amount you've drawn. Once construction is complete, the loan converts into a traditional fixed-rate or adjustable-rate mortgage, and you begin making principal and interest payments.
Key Components in Our Calculator:
- Total Construction Cost: The estimated total expense to build your home. This forms the basis for your initial loan amount if fully financed.
- Down Payment: The amount you contribute upfront. A larger down payment reduces the loan amount needed and can improve your interest rate.
- Annual Interest Rate: The interest rate for the permanent mortgage phase after construction is complete.
- Loan Term: The total number of years for the permanent mortgage (e.g., 15, 30 years).
- Construction Draw Period: The estimated number of months it will take to complete construction. During this time, you typically pay interest only on the disbursed funds.
- Interest Rate During Construction: The interest rate applied to the funds drawn from the loan during the construction phase. This rate is often lower than the permanent rate.
The Math Behind the Calculator:
The calculator estimates two key figures:
- Estimated Monthly Interest-Only Payment During Construction: This is calculated by taking the total loan amount (Construction Cost minus Down Payment), multiplying it by the Interest Rate During Construction (divided by 12 for monthly), and then dividing by the total number of months in the draw period.
Formula: (Loan Amount * (Interest Rate During Construction / 100 / 12))
- Estimated Monthly Principal & Interest (P&I) Payment After Construction: This uses the standard mortgage payment formula (Amortization formula) based on the final loan amount, the permanent Annual Interest Rate, and the Loan Term.
Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
- M = Monthly Payment
- P = Principal Loan Amount (Construction Cost – Down Payment)
- i = Monthly Interest Rate (Annual Interest Rate / 100 / 12)
- n = Total Number of Payments (Loan Term in Years * 12)
Disclaimer: This calculator provides an estimate based on the information provided. Actual loan terms, rates, and payments may vary. It is recommended to consult with a mortgage lender for precise figures and loan options.
function calculateLoan() {
var constructionCost = parseFloat(document.getElementById("constructionCost").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseInt(document.getElementById("loanTerm").value);
var drawPeriod = parseInt(document.getElementById("drawPeriod").value);
var interestRateDuringConstruction = parseFloat(document.getElementById("interestRateDuringConstruction").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = "; // Clear previous results
// Input validation
if (isNaN(constructionCost) || constructionCost <= 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTerm) || loanTerm <= 0 ||
isNaN(drawPeriod) || drawPeriod <= 0 ||
isNaN(interestRateDuringConstruction) || interestRateDuringConstruction constructionCost) {
resultDiv.innerHTML = "Down payment cannot exceed the total construction cost.";
return;
}
var loanAmount = constructionCost – downPayment;
var monthlyInterestConstruction = 0;
var monthlyPI = 0;
// Calculate interest-only payment during construction
if (interestRateDuringConstruction > 0) {
monthlyInterestConstruction = (loanAmount * (interestRateDuringConstruction / 100)) / 12;
}
// Calculate P&I payment for the permanent loan phase
if (interestRate > 0 && loanTerm > 0) {
var monthlyRate = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
monthlyPI = (loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments))) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
} else if (loanAmount > 0 && interestRate <= 0) {
// If rate is 0, payment is just principal divided by months
monthlyPI = loanAmount / (loanTerm * 12);
} else if (loanAmount === 0) {
monthlyPI = 0; // No loan, no payment
}
// Display results
var outputHTML = '
Estimated Payments:
';
outputHTML += '
During Construction:';
outputHTML += '
$' + monthlyInterestConstruction.toFixed(2) + ' (Interest Only)';
outputHTML += '
After Construction (P&I):';
outputHTML += '
$' + monthlyPI.toFixed(2) + '';
outputHTML += 'Based on a loan of $' + loanAmount.toFixed(2) + ";
resultDiv.innerHTML = outputHTML;
}