Building Loan Calculator South Africa: Interim Interest and Repayments
Estimate the interim interest you will pay during the construction period of your building loan, and the monthly instalment once the loan converts to a normal home loan. Enter your loan amount, building period, loan term and interest rate to get an instant breakdown.
Calculate My Repayments ↓Building Loan Calculator
Enter your building loan details below, then press Calculate to see your repayment breakdown.
Your Monthly Instalment After Completion
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Once the building loan converts to a home loan
Repayment breakdown
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This estimate splits your building loan into an interest only construction period and a normal home loan repayment period.
A building loan is paid out in stages, called progress payments, as construction reaches agreed milestones. During the building period, usually 9 to 12 months, you pay interim interest only on the funds already paid out, not full capital and interest instalments. Once the building is complete, or the building period ends, the loan converts to a normal home loan and you begin paying capital and interest over the remaining term. Use the calculator above for your own estimate, and confirm your exact figures with your bank’s building loan quotation.
How to Use the Building Loan Calculator
Four quick steps to an estimated repayment breakdown.
- 1 Enter your total building loan amount. This is the full amount approved by your bank for the build.
- 2 Choose your number of progress payments. Most banks use between 4 and 6 payments as building milestones are reached.
- 3 Enter your building period and total loan term. These determine how long you pay interim interest before full repayments start.
- 4 Enter your interest rate and press Calculate. Your interim interest, post completion instalment and total cost appear instantly.
The Building Loan Calculation Formula
A building loan has two phases: an interest only construction period, then a normal reducing balance home loan.
Interim Interest = (Loan Amount / 2) x Monthly Rate x Building Period in Months
Remaining Term = (Total Loan Term x 12) – Building Period in Months
Monthly Instalment After Completion = Loan Amount x Monthly Rate x (1 + Monthly Rate)^n / ((1 + Monthly Rate)^n – 1)
Total Repayment = Loan Amount + Interim Interest + Total Interest After Completion
Interim interest is estimated on the average outstanding balance during the building period, since progress payments are paid out gradually rather than all at once, so the loan amount is halved to approximate the average amount drawn down.
Worked Examples
Real calculations using the building loan formula, so you can see exactly how the two phases combine.
Example 1: R900,000 loan, 6 progress payments, 9 month building period, 20 year term, 11% per year
| Interim interest: R37,125.14 | Remaining term: 231 months |
| Monthly instalment after completion: R9,391.02 | Total interest: R1,306,450.76 |
| Total repayment: R2,206,450.76 | |
Example 2: R400,000 loan, 4 progress payments, 6 month building period, 15 year term, 10.25% per year
| Interim interest: R10,250.00 | Remaining term: 174 months |
| Monthly instalment after completion: R4,423.76 | Total interest: R379,984.24 |
| Total repayment: R779,984.24 | |
Example 3: R250,000 loan, 5 progress payments, 12 month building period, 25 year term, 12% per year
| Interim interest: R15,000.00 | Remaining term: 288 months |
| Monthly instalment after completion: R2,650.95 | Total interest: R528,473.60 |
| Total repayment: R778,473.60 | |
Building Loans in South Africa: The Complete Guide
A building loan, sometimes called a construction loan, works differently from a standard home loan. Instead of receiving the full amount as a lump sum, the funds are released gradually as your house is built, which changes both how the loan is drawn down and how you repay it during construction.
How progress payments work
Before construction starts, you agree with your bank on a number of progress payments, usually between 4 and 6, each tied to a construction milestone such as foundation, wall plate, roof and completion. Before releasing each payment, the bank sends a valuer to confirm the work has been done, then pays the amount directly. If you have paid a deposit, it is used first, before any progress payments are released.
Interim interest during the building period
As each progress payment is drawn down, you start paying interim interest on that amount. This is interest only, since no capital repayments are due yet. Interim interest increases as more of the loan is paid out, and you are expected to service it monthly to avoid a shortfall in the funds available to complete the build.
What happens once building is complete
Once the building is finished, or the building period comes to an end, whichever happens first, the loan converts into a normal home loan. From that point, you make full capital and interest instalments over the remaining term, calculated on the full loan amount using the standard reducing balance method.
Interest rates on building loans
Building loan rates are usually linked to the prime lending rate, which is set at the South African Reserve Bank’s repo rate plus a fixed margin the major banks apply. Since construction carries more risk than a completed property, lenders often add a building loan risk premium on top of the standard home loan rate, so your rate may be higher than a comparable completed-property home loan.
Methodology
This calculator estimates interim interest using the average outstanding balance during the building period, then works out the monthly instalment for the remaining term using the standard reducing balance formula once the loan converts to a normal home loan.
Assumptions used in this calculator
- Progress payments are assumed to be paid out evenly across the building period, giving an average outstanding balance of half the loan amount.
- The building period is assumed to end on schedule, with the loan converting to a normal home loan at that point.
- This calculator does not include valuation fees, additional progress payment fees, or credit life insurance.
- Interest is assumed to stay fixed for the full term, though most building and home loans in South Africa have a variable rate linked to prime.
Frequently Asked Questions
It estimates the interim interest you will pay during construction, and the monthly instalment once your building loan converts to a normal home loan.
A home loan is paid out as a single lump sum, while a building loan is paid out in progress payments as construction reaches agreed milestones, with interim interest charged only on the amount already paid out.
Usually between 4 and 6, agreed with your bank before construction starts. Extra progress payments beyond the agreed number typically attract an additional fee.
No, only interim interest on the amount already drawn down. Full capital and interest instalments only start once the building is complete or the building period ends.
Capital and interest repayments generally become payable once the agreed building period expires, whether or not construction is complete, unless your bank approves an extension.
No. This tool gives a planning estimate based on an even disbursement of progress payments. Your actual interim interest depends on exactly when each progress payment is released, so always confirm your exact figures with your bank.