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C-Value!
C-Value!
Construction Loan Calculator for Windows

An extremely flexible calculator for Windows computers.

  • Supports single or multiple borrows.
  • Payments can be regular or irregular
  • Create and print amortization schedules.
  • Supports interest only payments.
  • Save your data to disk for later use.

Suitable for auditors, accountants, lawyers and you!

What is a construction loan, and how do you use a construction loan calculator?

Spend a few minutes here, and I'll explain both construction loans and how to use this calculator, step-by-step.

A mortgage is the type of loan one would take out to finance the purchase of an existing home or building. The amount borrowed by the debtor gets paid to the seller as one lump sum at the contract closing.

But what about the case when the future homeowner wants to build a home, and they do not have the funds to cover the price of the land or the construction cost? A lender won't issue a mortgage on an unbuilt building.

In that case, the future owner needs to apply for a construction loan. Unlike mortgages which have a single borrow, construction loans involve multiple borrows. The borrower, builder, and lender will agree on the construction cost and the amount financed. But rather than provide all the funds at the start of the project, the lender will advance predetermined amounts at various milestones.

Making incremental advances to the builder on behalf of the borrower reduces both (1) the risk and (2) the costs for the borrower. If the entire construction cost gets paid to the builder up-front, and the builder should happen to go bankrupt or disappear, the borrower would still be obligated to pay back the loan.

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IdxNoSeriesDateAmount# PeriodsFrequencyEnd DateSeries OptionscmpFreqspecialSeriesTypeSpecialSeriesStruct
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Granted, if you are dealing with a reputable builder, such a scenario is unlikely. But by their nature, construction loans, do save borrowers money.

Why?

The borrower is responsible for paying interest charges as they borrow the money. By lending additional amounts over time, the debt balance gradually increases which holds down interest costs. It may not amount to a lot, but why pay more interest when it's not necessary?

While you will save some interest charges due to the way funds are advanced with construction loans, I would be remiss if I didn't mention that you'll find interest rates to be higher for construction loans when compared with mortgage rates. The reason for the higher rate is because the lender is taking on added risk, and lenders want additional compensation for the added risk.

This example also applies to our online Ultimate Financial Calculator. The C-Value! program for Windows works in a similar way and has a few more features including the ability to save your work.

All users should work through the first tutorial to understand basic concepts about the calculator.

How to Calculate a Construction Loan with Multiple Loan Advances
Tutorial 11

To create a construction loan amortization schedule, follow these steps:

  1. Set "Schedule Type" to "Loan"
    • Or click the [Clear] button to clear any previous entries.
    • The top two rows of the grid will not be empty
    • Delete the 2nd row by selecting it and clicking on the [Delete] button
  2. Set "Rounding" to "Adjust last amount to reach "0" balance" by clicking on the {Settings} {Rounding Options}
  3. In the header section, make the following settings:
    1. For "Calculate Method" select "Normal".
    2. Set "Initial Compounding" to "Daily".
    3. Enter 7.25 for the "Initial Interest Rate".
  1. In row one of the cash flow input area, create a "Loan" series
    1. Set the "Date" to September 13, 2016
    2. Set the "Amount" to 75,000.00
    3. Set the "# Periods" to 1
      • Note: Since the number of periods is 1, you will not be able to set a frequency. If a frequency is set, it will be cleared when you leave the row
  1. Move to the second row of the cash flow input area. Select "Payment" for the "Series". The regular payment amount is unknown. It will be based on the assumption that the loan is to be paid-off in 15-years, i.e. 180 monthly payments (though it will actually be paid off much sooner).
    1. Set the "Date" to October 1, 2016
    2. Set the "Amount" to "Unknown" by typing "U".
    3. Set the "# Periods" to 180
    4. Use the [Tab] key to tab to Frequency. Select "Monthly".
    5. The "End Date" will automatically be calculated
  • Your calculator should now look like this:
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Construction loan first borrow
Construction loan, first borrow and first payment calculation.
  1. Calculate the unknown. The result is $683.00
Construction loan first payment
First payment calculated
  1. Reset the "# Periods" for the first payment series to 1. We do this because only one payment is made before the next loan advance is required.
  2. Create a "Loan" event in row three of the cash flow input area
    1. Reset the "Date" to October 12, 2016
    2. Set the "Amount" to $35,400.00
    3. Set the "# Periods" to 1
  3. Move to the fourth row of the cash flow input area. Select "Payment" for the "Series". The regular payment amount is unknown
    1. Set the "Date" to November 1, 2016
    2. Set the "Amount" to "Unknown"
    3. Set the "# Periods" to 179. (180 months less the one payment already made)
  • Before the calculation, your screen will look like this.
Construction loan second borrow
Second borrow and second payment calculation setup
  1. Calculate the unknown. The result is now $1006.65
Construction loan second payment
Second payment calculated
  • There are two more loan events - both in November.
  1. Reset the "# Periods" for the second payment series (row four) to 1.
  2. Create a "Loan" event in row five of the cash flow input area
    1. Set the "Date" to November 8, 2016
    2. Set the "Amount" to $110,500.00
    3. Set the "# Periods" to 1
  3. 2nd loan event in November
    1. Create a "Loan" event in row six of the cash flow input area.
    2. Set the "Date" to November 29, 2016
    3. Set the "Amount" to $110,500.00
    4. Set the "# Periods" to 1
  4. Move to the seventh row of the cash flow input area. Select "Payment" for the "Series". The regular payment amount is unknown
    1. Set the "Date" to December 1, 2016
    2. Set the "Amount" to "Unknown"
    3. Set the "# Periods" to 178. (180 months less the two payments already made.)
  • Before the calculation, your screen will look like this.
Construction loan two loan advances
Two more loan advances
  1. Calculate the unknown. The result is now $3,029.55
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Construction loan third payment series
Third payment series calculation
  1. Construction is completed. Closing on the mortgage is January 16th, 2017. What's the balance due?
    1. Click on the seventh row. Set the "# Periods" to "2". (For payments due Dec. 1 and Jan. 1.
    2. Click on the eighth row. Set the "Series" to "Payment"
    3. Set the "Date" to "January 16th, 2017"
    4. Set the "Amount" to "Unknown"
    5. Set the "# Periods" to "1"
Construction loan unknown balance
Setting up to calculate the unknown balance
Construction loan final balance
Calculated total balance due
  1. And, as usual, if you want to see a detailed amortization schedule showing how the monthly payment is allocated between principal and interest, click on the "Schedule" tab above the input area.
  2. Additionally, to visualize the cash flow, click on the "Charts" tab.

Comments, suggestions & questions welcomed...

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