Construction loan rates usually run about 1 to 2 percentage points above a standard 30-year fixed mortgage rate, according to The Lenders Network. During the build you pay interest only on the money drawn so far, so the interest cost depends as much on the draw schedule and build time as on the rate.
How are construction loan rates set?
Most construction loans are priced from a benchmark, such as the prime rate or the lender’s own mortgage rates, plus a margin for the extra risk of lending on a house that does not exist yet. The construction phase is often a variable rate. With a construction-to-permanent loan, the permanent mortgage rate may be locked at closing or set when the loan converts; ask each lender which.
To see where mortgage rates are this week, check Freddie Mac’s weekly Primary Mortgage Market Survey, then add 1 to 2 points for a typical construction-phase rate.
How much interest do you pay during construction?
Because the balance grows as the house goes up, the average balance over the build is roughly half the loan if draws are spread evenly. This table uses that shortcut for a 12-month build:
| Loan amount | At 7% | At 8% | At 9% |
|---|---|---|---|
| $250,000 | about $8,750 | about $10,000 | about $11,250 |
| $350,000 | about $12,250 | about $14,000 | about $15,750 |
| $450,000 | about $15,750 | about $18,000 | about $20,250 |
These are illustrations, not quotes. Use the calculator above for your own draw schedule.
What affects your construction loan rate?
- Credit score: conventional construction lenders usually want 680 or higher.
- Down payment: 20% to 25% is typical for conventional loans; more equity often means a better rate.
- Loan type: FHA, VA and USDA programs have their own pricing.
- One-time vs two-time close: see construction-to-permanent loans.
- Builder and project: a well-documented budget and an experienced builder lower the lender’s risk.
How to lower the cost
- Shorten the build: every extra month adds interest and may trigger an extension fee of 0.25% to 0.5% of the loan.
- Compare at least three lenders, including local banks and credit unions that do construction lending.
- Ask about rate locks and float-down options for the permanent loan.
More on construction loans
- How construction loans work
- Construction loan rates
- Construction-to-permanent loans
- FHA construction loans
- VA construction loans
- USDA construction loans
- How to get a construction loan
- Construction loan calculator
Sources
- The Lenders Network: Construction loan requirements (updated June 2026)
- Freddie Mac: Primary Mortgage Market Survey (weekly 30-year rate)
Loan terms change often and vary by lender. Nothing on this page is a loan offer or financial advice: confirm current rates, fees and eligibility with lenders before you apply.