New Build Construction Loan Calculator

Interest on a construction loan is calculated daily, but you only pay interest on the exact amount of money the bank has released so far, not the total loan limit. Construction funds are typically placed on a floating, interest-only rate until the Code Compliance Certificate (CCC) is issued. Once the build is fully complete, the loan can be converted to a standard fixed interest rate.

The biggest cash flow challenge when building a house is the "rent and mortgage overlap." Because the bank releases funds to your builder in stages (progress payments), your mortgage payment will start small and gradually increase at each milestone. By the time the house is nearly finished, you will be paying your standard rent plus a nearly full mortgage. You must budget carefully for this overlap during the 4 to 12 months it takes to build.

A progress payment is a staged release of funds from the bank to your builder. Instead of handing over the entire loan amount upfront, the bank pays the builder in installments (usually 5 to 6 stages) as specific milestones are reached, such as laying the foundation, standing the framing, and reaching the lock-up stage.

In New Zealand, an initial builder's deposit should typically be negotiated to between $10,000 and $20,000. While some builders may request 10% of the total build cost upfront, keeping the initial deposit lower reduces your financial risk and makes it significantly easier to manage the bank's lending criteria.

Yes, variations must usually be paid for out of pocket. A bank approves a construction loan based strictly on the original Fixed-Price Building Contract. If you choose to upgrade materials mid-build, or if Provisional Sums (PC Sums) like earthworks end up costing more than estimated, the bank will not automatically increase your loan. You must cover these extra costs with your own cash.