Construction Loan Rates
AAPL Member · Direct Lender Since 2016 · NMLS #1979189
Construction loan pricing has a feature no other loan does: for much of the term, you’re not paying interest on most of the money, because most of it hasn’t been disbursed yet. That single fact — interest charged only on funds drawn — reshapes your real cost and is worth understanding before you fixate on a headline rate. A ground-up construction loan is short-term financing that disburses through a draw schedule, priced on the project, the team, and your leverage. This page explains the components of your cost and what moves your number. We’ve priced construction loans as a direct lender since 2016.
You Pay Interest Only on What's Been Drawn
A construction loan funds in stages — foundation, framing, mechanicals, finish work — and on a non-Dutch loan you pay interest only on the balance actually disbursed at each point, not the full committed amount. In the early months, when little has been drawn, your carry is low; it rises as the build progresses and more is funded. This is why the effective cost of a construction loan is materially lower than applying the rate to the full loan for the whole term. A lender that charges interest on undrawn funds (Dutch interest) costs you more even at the same quoted rate, so always ask which applies.
Rate, Points, and the Two Leverage Limits
Your cost components are the interest rate (on drawn funds, typically interest-only) and points (a one-time origination fee). Your loan amount — and indirectly your risk-based pricing — is set by the two construction limits: up to 90% of loan-to-cost (LTC) and within 75% of after-completion value (ARV), whichever is tighter. A project with comfortable room under both limits is lower-risk and prices better than one pushing the maximums. Size it on our hard money loan estimator first.
What Drives Your Rate
Experience and the team come first: execution risk is the biggest variable in a build, so a proven builder — or a strong, proven general contractor behind a newer sponsor — earns better pricing. The project package matters too, as clean plans, a realistic phased budget, and permits in hand reduce risk and price. Leverage plays in — more equity and more room under the LTC/ARV ceilings lower the rate. Credit is reviewed (no minimum, but stronger credit improves pricing). And the market sets the baseline, since pricing tracks the broader rate environment. The requirements page details the full package we evaluate to price a project.
Term and Exit
Construction loans typically run 12 to 24 months to match the build timeline, interest-only on drawn funds. Your exit — and its certainty — also affects pricing: a clear sale on completion or a pre-planned refinance into a DSCR loan for a build-to-rent hold is lower-risk than an open-ended one. We map the exit before funding so the structure, and the price, fit the finish. You can compare the broader short-term side on our hard money loan rates today page.
What Affects Your Construction Rate
What Affects Your Construction Rate
Frequently Asked Questions
They vary by project and move with the rate environment, so there’s no single number worth posting. Your rate depends on your experience and team, the project package, your leverage under the LTC/ARV limits, and your credit. A live quote on your actual project is the only real number.
No — on a non-Dutch construction loan you pay interest only on the funds actually drawn at each stage, not the full committed amount. Since money is released as the build hits milestones, your early carry is low and rises as more is disbursed.
Dutch interest charges you on the full committed loan amount even before it’s disbursed; non-Dutch charges only on drawn funds. Non-Dutch costs you less for the same quoted rate, especially early in a build, so always confirm which a lender uses.
Execution risk — which mostly comes down to experience. A proven builder, or a strong, proven general contractor behind a first-time sponsor, plus a clean project package, lowers risk and earns the best pricing.
Typically 12 to 24 months, sized to your build timeline, interest-only on drawn funds. It’s short-term by design and repaid by a sale on completion or a refinance into permanent financing such as a DSCR loan for a build-to-rent hold.
Want a real number on your build?
Tell us the plans, the budget, and the lot. We price our own construction loans and charge interest only on drawn funds, so your effective cost stays low.