How to calculate your construction loan repayments
Whether you’re building on newly purchased land or property you already own, our construction loans are designed to take the stress out of building.
While construction is in progress, your repayments will be interest-only. They’ll gradually increase as your build progresses because your loan balance will be going up as we pay more funds to your builder.
To take the guesswork out of each repayment, you can calculate what you owe by following these two easy steps:
Calculate the daily interest.
- Multiply the loan balance by the interest rate (as a %)
- Divide this figure by 365 (amount of days in the year)
- Multiply the daily figure by the number of days that the account stayed on that balance.
Example.
Let’s say your interest rate is 4%, your owing balance is $50,000, and a progress payment of $35,000 is made on the 12th of the month.
1. Calculate the daily interest on $50,000 for the first 12 days
- $50,000 x 4% = $2,000
- $2,000 divided by 365 (total days in a year) = $5.48 of interest per day
- $5.48 x 12 days = $65.75
2. Calculate the daily interest for the remaining 19 days of the month, after a progress payment of $35,000 is released. This takes the total owning balance to $85,000:
- $85,000 x 4% = $3,400
- $3,400 divided by 365 (total days in a year) = $9.32 of interest per day
- $9.32 x 19 days = $176.99
Adding these two together ($65.75 + $176.99) will give you this month’s interest-only repayment amount of $242.74.
Remember to keep in mind how many days are in the particular month you are calculating the repayment for.