Construction Loan Calculator With Land Equity: Using Your Land as a Down Payment
If you already own your land, the equity in it can often count toward the down payment on a construction loan. Equity is what the land is worth minus anything you still owe on it. This calculator shows how far your land equity goes toward the equity your lender requires, and how much cash you'd still need, if any.
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How land equity counts toward a construction loan
Lenders want you to have a stake in the project, usually described as a down payment or required equity. When you own the lot, the lot itself can supply some or all of that stake. Fannie Mae's single-closing guidelines treat a build on land you already own as a limited cash-out refinance, measured against the home's as-completed value. Its construction-to-permanent FAQs confirm a single-closing loan can be used when you already own the lot and need financing to build on it.
The calculator works in three steps:
- Land equity = what the land is worth minus what you owe on it.
- Required equity = total project cost (land value plus build cost) times the share your lender requires.
- If your land equity covers the requirement, you bring no cash for it. If it falls short, cash makes up the difference.
Worked example
Say you own a lot worth $91,057, the average finished lot cost in the NAHB 2024 cost survey, and you still owe $20,000 on it. Your land equity is $71,057.
Your build costs $428,215, so the total project cost is $519,272. Your lender tells you how much equity it requires on that total.
- If the required equity is less than $71,057, your land covers it, and you'd borrow the build cost plus the land payoff: $448,215.
- If the required equity is more than $71,057, you bring cash for the difference, and the loan shrinks by the same amount.
Enter your own numbers above to see your result.
Frequently asked questions
Can I use my land as a down payment for a construction loan?
Often, yes. Many lenders count the equity in land you own toward the required equity on a construction loan. Equity is the land's value minus what you owe on it.
Does land equity count as a down payment?
For many construction-to-permanent programs it does. The lender looks at the land's value, what you owe, and the total project cost. Rules vary by lender and program.
How is my land valued?
Usually by appraisal, as part of the as-completed appraisal of the finished home. If you bought the land recently, some lenders use the lower of what you paid or the appraised value.
What if I still owe money on my land?
Only your equity counts, so subtract what you owe from the land's value. The construction loan usually pays off the land loan at closing.
What if my land equity is more than my lender requires?
Extra equity can mean a smaller loan relative to the value, but most construction-to-permanent loans won't pay it out to you as cash. The calculator shows extra equity separately.
More construction loan calculators
Related guides
- Using land you own toward a construction loan
- How much can you borrow for a construction loan?
- Building on land held in a family trust
Sources
- Fannie Mae Selling Guide B5-3.1-02, purchase vs. limited cash-out refinance
- Fannie Mae, FAQs: Construction-to-Permanent Financing
- 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.