What an acquisition and construction loan covers
An acquisition and construction (A&C) loan, also called an acquisition, development and construction (ADC) loan, finances the land purchase and the construction in one facility. The lender funds part of the land at closing and releases the construction budget in draws as work is inspected. The developer puts in cash equity, often first.
These loans are underwritten mainly on loan to cost. Budgets usually include an interest reserve that pays the monthly interest through construction and, for some projects, through lease-up or sell-out.
Loan to cost, ARV and the interest reserve
Lenders cap the loan as a share of total land and construction cost and as a share of the as-completed value, and lend the lower amount. Builders have reported tighter credit for these loans in recent years, so limits of around 60% to 75% of cost are common. Enter the limits from your own term sheet.
With Paid monthly selected, the total interest result is the interest reserve the budget needs for the whole term, and Largest monthly interest shows the payment once the loan is fully drawn.
Worked example: a $3 million project
A developer buys land for $600,000 with development and construction costs of $2,400,000 and an as-completed value of $4,000,000. The lender funds 50% of the land, $300,000, and 80% of construction, $1,920,000, in 18 monthly draws. The loan is $2,220,000, which is 74% of the $3,000,000 cost and 55.5% of ARV. With a 75% cost limit and a 70% ARV limit, the most both limits allow is $2,250,000.
At 10% a year, paid monthly from the interest reserve over an 18-month build and six months of lease-up or sale, interest totals $308,000. The largest monthly payment, once fully drawn, is $18,500. With 1.5 points ($33,300), the total cost of financing is $341,300, and profit after financing is $658,700, or 19.7% on cost.
What this calculator does not decide
This estimate does not cover entitlement or permitting risk, the appraisal, contingency requirements, completion guarantees or recourse terms. Real draws follow the construction schedule and inspections, so actual interest can differ from an even or tapered pattern.
If you already own the land, use the US construction loan calculator with a land advance of zero.
For buying and renovating an existing property, use the US fix and flip loan calculator .
Use the right country page
This page stays in US dollars and uses US terms: acquisition and construction loans, annual rates, origination points, an interest reserve and loan to ARV on the loan amount. The country choices above the inputs open separate local pages. Choosing United Kingdom opens the UK site acquisition finance calculator, which uses a monthly rate, rolled-up interest and loan to GDV on the gross balance. The inputs reset and amounts are not converted.
Inputs for the acquisition and construction loan calculator
Land acquisition cost
What you pay for the land, before closing costs and financing.
Development and construction costs
Site work, construction, soft costs and contingency for the project.
As-completed value (ARV)
The appraised value of the finished project.
Acquisition advance
The share of the land cost the lender funds at closing.
Build costs funded
The share of development and construction costs released in draws.
Quoted interest rate
The note rate on your term sheet, not the APR. Usually quoted per year.
Rate quoted per
Year (nominal) divides the annual rate by 12. Choose Month for a monthly rate.
Build period
Months of construction. One draw is made at the start of each month.
Sale or refinance period
Months of lease-up or sale after completion while the full loan is outstanding.
Draw pattern
Even, front-loaded or back-loaded construction draws.
How interest is paid
Paid monthly from an interest reserve is usual. Rolled up adds interest to the payoff.
Origination fee (points)
One point is 1% of the total loan, paid at closing.
Exit fee
A percentage some lenders charge at payoff. Enter zero if none.
Exit fee based on
Whether any exit fee is a percentage of the total loan or of the ARV.
Other finance costs
Appraisal, inspection, title, legal and broker costs paid separately.
Lender loan-to-cost limit
The highest loan as a share of land plus development and construction costs.
Lender ARV limit
The highest loan as a share of the as-completed value, compared with the loan amount.
CALCULATOR QUESTIONS
US acquisition and construction loan calculator questions
What is an A&C or ADC loan?
A loan that finances buying land and building on it in one facility, released in draws, usually with an interest reserve.
How is the interest reserve sized?
It covers the interest on money drawn from closing through completion, and sometimes lease-up. Choose Paid monthly and use the Interest result.
How much will a lender fund?
Usually a share of total cost, often around 60% to 75%, and not more than its limit on the as-completed value. The lower figure applies.
Do I need equity before the loan funds?
Usually. Many lenders require the developer's cash to go in first, before construction draws.
What happens when I change country?
The United Kingdom option opens the separate UK site acquisition finance page, in pounds, with its own defaults. Your inputs are reset rather than converted.