Mortgage Construction Loan Guide for Building New Homes (2026)
Navigate construction loan financing: loan-to-cost limits, draw schedule, interest-only phase, and conversion to permanent mortgage for home building.
Summary
Construction loans finance new home building with different terms than traditional mortgages. This guide explains draw schedules, interest phases, and conversion.
Key Steps
- 1Understand loan structure: construction phase (interest-only) then permanent mortgage conversion.
- 2Check loan-to-cost: typically 80% of total project cost including land, construction, soft costs.
- 3Track draw schedule: funds released in stages as construction milestones completed.
- 4Monitor interest costs: interest accrues on drawn funds during construction phase.
- 5Plan conversion timing: construction complete triggers permanent mortgage, lock rate beforehand.