Construction Loan Interest Formula

[EGavin]

Hello!

I'm in the process of building a new home. I have built an Excel sheet
that adds up each draw on my loan. I would like to put in a formula
that calculates a daily interest based on amounts as they are drawn
from the bank. I'm not paying any principal on the loan during the 9
month construction phase. The monthly rate is 6.9% Can someone help
me with a formula that calculates interest as draws are taken on the
loan?

Thanks,
EGavin

 

[Fred Smith]

Specifics will depend on how your spreadsheet is set up, but, in general you
want to calculate the average daily loan balance, then multiply by 6.9%/12 to
get the interest charge for that month.

You could have a spreadsheet which calculates the loan balance daily, in which
case you could multiply each daily balance by 6.9%/365 to get the interest
charged that day, then add them up for the month.

Or, if your spreadsheet changes only when you draw down funds, calculate
3.9%/365*NumberDays since last drawdown.

If you are paying the interest every month, fine. If not, add the interest at
the end of the month to the loan balance.