Construction draw and interest-reserve model

How this calculation works

Method and assumptions

For each actual calendar month, apply the selected day count to opening balance plus the timing-weighted draw. Capitalized interest increases the next month’s opening balance. Compare modeled total interest and peak balance with reserve and commitment.

Worked example

The default beginning-of-month draws for January–June 2027 are $300,000, $500,000, $700,000, $650,000, $500,000 and $250,000. At 8% Actual/360 with month-end interest capitalization and no opening balance, the $2.9 million draws generate $70,033.18 interest and a $2,970,033.18 ending balance. The entered $150,000 reserve exceeds modeled interest by $79,966.82. Actual daily draws or a delayed completion would change the result.

Before using the result

Know the boundaries

• Educational scenario, not a quote, commitment, approval, appraisal or payoff statement.
• Defaults and thresholds are editable illustrations; the executed documents and lender underwriting control.
• Monthly draws approximate daily disbursements; midpoint timing is an approximation. The reserve is a funding comparison, not extra capacity beyond the commitment. Interest capitalizes at month-end without within-month compounding.