Construction Contingency Calculator: What a Cost Overrun Does to Your Budget
Construction costs often run over the original budget because of change orders, material price increases, or surprises in the ground. A contingency is money set aside for those overruns. This calculator shows how much of an overrun your contingency would cover, and how much cash you'd need for the rest.
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Why contingency matters on a construction loan
Your construction loan is sized to your approved budget. If costs go over, the lender usually won't simply add money to the loan. You'd need a contingency built into the budget, cash of your own, or another approved source. Fannie Mae's construction-to-permanent FAQs describe limited cases where documented overruns can be handled: on a two-closing transaction, documented overruns paid directly to the builder may be included in the permanent loan amount, and a second mortgage used only for construction overruns can be financed into a limited cash-out refinance.
Worked example
Take a construction budget of $428,215, the NAHB 2024 average construction cost from its Cost of Constructing a Home survey.
- If the build runs over by a tenth, that's $42,822 more.
- If it runs over by a fifth, that's $85,643 more.
Whatever your contingency doesn't cover has to come from your cash or another approved source before the lender releases later draws. Enter your budget, your contingency, and the overruns you want to test above.
Frequently asked questions
How much contingency should I have for building a house?
It depends on how complete your plans are, your site, and your builder's contract. Many lenders and builders want a contingency line in the budget. Ask your lender what it requires and test a few overruns here.
What happens if my construction loan runs out of money?
The lender usually requires you to cover the overrun with your own funds or an approved source before releasing more draws. Work can stall if the gap isn't covered.
Can cost overruns be added to my construction loan?
Sometimes, but not automatically. Some lenders allow a loan modification or a second loan. Fannie Mae allows documented overruns in limited cases, such as paying the builder at a two-closing permanent loan.
What causes construction cost overruns?
Common causes are change orders, material price increases, site surprises like rock or poor soil, allowances that run short, and delays.
Does a fixed-price contract prevent overruns?
It helps, but it doesn't cover everything. Change orders, allowance overages, and unknown site conditions can still raise costs.
More construction loan calculators
Related guides
- What if your construction loan goes over budget?
- How detailed must a construction loan scope be?
- What lenders check when approving your builder
Sources
- Fannie Mae, FAQs: Construction-to-Permanent Financing (Q10, Q12, Q13)
- NAHB, Cost of Constructing a Home, 2024
This calculator is for general education. Results are estimates based on the numbers you enter, not an offer of credit, a rate quote, or a commitment to lend. Requirements vary by lender, loan program, and location.