Construction Loan Interest Reserve and Draw Calculator
Estimate capitalized interest from the drawn loan balance, calculate loan to cost, and schedule monthly construction draws.
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Use this estimate to prepare, or request a financing review when you are ready to share the property, requested proceeds, and timeline.
Estimate capitalized construction interest from the actual drawn balance rather than the full commitment. Draws are assumed to occur at the beginning of each month and interest is capitalized at month end.
Project and Loan
Draw Schedule Setup
Use the even schedule as a starting point, then edit any month below to match the construction budget and expected timing.
Interest Reserve
$208,069.94
Total Loan Commitment
$3,958,069.94
Loan to Cost
79.16%
Estimated Borrower Equity
$1,041,930.06
| Month | Beginning Balance | Construction Draw | Capitalized Interest | Ending Balance |
|---|---|---|---|---|
| 1 | $750,000.00 | $ | $7,083.33 | $1,007,083.33 |
| 2 | $1,007,083.33 | $ | $8,904.34 | $1,265,987.67 |
| 3 | $1,265,987.67 | $ | $10,738.25 | $1,526,725.92 |
| 4 | $1,526,725.92 | $ | $12,585.14 | $1,789,311.06 |
| 5 | $1,789,311.06 | $ | $14,445.12 | $2,053,756.18 |
| 6 | $2,053,756.18 | $ | $16,318.27 | $2,320,074.45 |
| 7 | $2,320,074.45 | $ | $18,204.69 | $2,588,279.15 |
| 8 | $2,588,279.15 | $ | $20,104.48 | $2,858,383.63 |
| 9 | $2,858,383.63 | $ | $22,017.72 | $3,130,401.34 |
| 10 | $3,130,401.34 | $ | $23,944.51 | $3,404,345.85 |
| 11 | $3,404,345.85 | $ | $25,884.95 | $3,680,230.80 |
| 12 | $3,680,230.80 | $ | $27,839.13 | $3,958,069.94 |
| Total | $3,000,000.00 | $208,069.94 | $3,958,069.94 |
This planning estimate assumes a constant rate, no lender fees, no unused fee, no retainage, no equity first requirement, and no timing gap between draw funding and interest capitalization. Actual lender draw procedures and reserve sizing may differ.
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How the Construction Interest Reserve Calculator Works
The calculator starts with the initial funded loan balance and adds each scheduled construction draw at the beginning of the month. Monthly interest is calculated on that drawn balance and added to the loan at month end. The sum of the monthly interest amounts is the estimated interest reserve.
How Loan to Cost Is Calculated
Loan to cost compares the estimated total loan commitment with the total project cost. In this calculator, the commitment includes the initial funded balance, all scheduled future construction draws, and the capitalized interest reserve.
Why Draw Timing Changes the Interest Reserve
Construction interest accrues only after funds are advanced. Front loaded draws increase the average outstanding balance and usually require a larger reserve. Delaying draws reduces interest but can create funding risk if the schedule is not realistic. Match the monthly schedule to the construction budget, expected inspections, retainage, and lender funding process.
Construction Reserve Worked Example
For a $5,000,000 project with a $750,000 initial funded balance, $3,000,000 of future draws spread evenly across 12 months, and an 8.5 percent annual rate, the model estimates about $208,070 of capitalized interest. The resulting estimated commitment is about $3,958,070, or 79.16 percent of total project cost.
Choosing Inputs and Reading the Draw Schedule
Use the lender funded opening balance rather than total costs incurred before closing. Enter monthly draws from the construction budget and timeline, including expected inspection and funding delays. The calculated reserve can be understated if the project runs late, rates rise, draws occur earlier, or the lender charges interest and fees differently.