The first charge usually comes small, almost forgettable. Months later, with construction well under way, it already weighs on the budget, and many buyers only then discover that not a single cent of it reduced the debt.
How construction phase interest works
When a buyer signs a bank loan while the building is still under construction, the bank does not hand over the money at once. Caixa's booklet on the construction phase (Caixa Econômica Federal is a federal state-owned bank) explains that the amount is passed to the builder gradually, in proportion to construction progress.
On every real released, the buyer starts paying monthly charges. That is what the Brazilian market calls juros de obra or taxa de evolução de obra, interest during construction. Under the same booklet, during construction the charge combines interest, monetary adjustment, an administration fee (when there is one) and insurance.
Amortization, the part that reduces the debt, only starts later. So the installment grows while the outstanding balance grows too. In the first months, when little has been released, it looks irrelevant; by the end of construction, it gets close to a normal mortgage payment without taking anything off the principal.
When it applies and when it does not
This model appears in so-called associative credit (crédito associativo), in which the buyer finances with the bank while the unit is still off-plan. One example is the Minha Casa, Minha Vida housing program contracts analyzed by the STJ in Theme 996, discussed below.
On the northern coast of Santa Catarina, many launches work differently. The buyer pays the down payment and installments directly to the developer during construction and only goes to a bank at handover, if needed. In that case there is no construction phase interest, because the bank has not released anything yet.
What runs in that model is the adjustment of the outstanding balance by the INCC, Brazil's construction cost index, covered in our guide to the INCC construction cost index. Before comparing two offers, find out which of the two models each one uses.
What usually applies to foreign buyers
Brazilian mortgages, including construction phase financing, generally assume residence and verifiable income in Brazil. Non-resident foreign buyers more often pay with their own funds or in direct installments to the developer, which means the INCC applies and juros de obra do not.
If you do have Brazilian residence and income and plan to finance, ask the bank directly which model it would use.
How to estimate the amount month by month
Caixa publishes the formula in its booklet. The month's interest is the adjusted outstanding balance multiplied by the contract's nominal annual interest rate, divided by 1,200. Monetary adjustment follows the TR, a Brazilian reference rate, in the contracts the document refers to.
To see the effect, here is a simulation with round numbers and stated assumptions:
- a R$ 400,000 loan, released in 24 equal tranches over 24 months of construction;
- a hypothetical rate of 10% a year, chosen only for the math (not any bank's rate);
- TR equal to zero, no insurance and no fees.
| Construction month | Balance released | Month's interest (simulation) |
|---|---|---|
| 1 | R$ 16,667 | R$ 139 |
| 6 | R$ 100,000 | R$ 833 |
| 12 | R$ 200,000 | R$ 1,667 |
| 18 | R$ 300,000 | R$ 2,500 |
| 24 | R$ 400,000 | R$ 3,333 |
Over the 24 months, the simulation adds up to R$ 41,667 paid in interest alone, without reducing the R$ 400,000 owed at all. In real life, insurance, fees and monetary adjustment come on top, and the release schedule is rarely linear.
The math also shows what weighs most: the last months. With almost the whole balance released, each extra month of construction costs the full amount, R$ 3,333 in the simulation. That is why the delivery deadline matters so much to people who finance off-plan.
What comes on top of the interest
The construction phase installment includes other items. The mandatory insurance on Brazilian home loans covers death and permanent disability and physical damage to the property, and the administration fee applies when the contract provides for it.
Caixa's booklet also notes that the Total Effective Cost sheet handed over at signing does not account for variable indexes, such as the TR, and is therefore theoretical. The amount charged each month may differ from it.
When it starts and when it ends
It starts quickly. According to Caixa's booklet, the buyer begins paying the month after signing, by automatic debit, even without notice.
The end depends on three steps. Caixa states that once completion of the construction and use of all funds are confirmed, the contract can enter the repayment phase.
The last construction tranche stays blocked until the certificate recording the construction at the property registry is presented. And if construction is delayed, the repayment period only begins after the development is completed and legalized.
In practice, the milestone is the occupancy certificate (habite-se) followed by the recording of the building on the land's registry entry (matrícula). Until that happens, the contract stays in the construction phase. For the full path from start to finish, see our article on financing an off-plan apartment (in Portuguese).
If construction is delayed
Caixa's booklet includes an important rule for developments financed by the bank: if delivery is more than six months late relative to the construction period in the contract, responsibility for the charges shifts to the builder until actual delivery. Check the monthly charge clause in your contract, because that is what governs.
What the courts have decided
The most cited case is Theme 996 of the Superior Court of Justice (STJ), decided on September 11, 2019 in REsp 1,729,593/SP, final on November 27, 2019. The STJ is Brazil's highest court for non-constitutional federal law, and a "repetitive theme" ruling binds lower courts on the same question.
Among the theses set in Theme 996, thesis 1.3 says it is unlawful to charge the buyer construction phase interest, or any equivalent charge, after the delivery deadline agreed in the contract, including the grace period.
There is a detail many texts leave out. According to the theme's page at the STJ, the theses were set for off-plan purchase contracts under the Minha Casa, Minha Vida program, in income brackets 1.5, 2 and 3. Outside that program, the decision serves as a reference, but the outcome depends on the contract and the specific case.
The same theme brought another useful rule: once there is a delay, adjustment of the balance by the construction cost index stops and must be replaced by the IPCA (consumer inflation), unless the IPCA is more expensive for the consumer.
And Law 4,591/1964, in article 43-A added by Law 13,786/2018, accepts up to 180 days of grace when the contract provides for it. If the delay goes beyond that, a buyer who is up to date with payments is entitled to compensation of 1% a month on the amount paid.
This article is for information only and does not replace advice from a lawyer licensed in Brazil.
What to check in the contract before signing
Many disputes over construction phase interest come from clauses nobody read. Four points deserve attention:
- Construction period: the grace period and any delay are counted from it. It should be written with a fixed date, not tied to the release of the loan.
- Monthly charge clause: states what makes up the installment during construction and who pays if the work is late.
- Release schedule: shows how much the bank releases at each stage and, as a result, how the installment will grow.
- Rate and index: the nominal annual rate and the way the balance is adjusted define the simulation math.
With these four items, you can redo this article's table for your own case.
Before signing an off-plan loan
Construction phase interest is scary because it grows without reducing the debt and because nobody usually shows the math before signing. With the formula and the simulation, it stops being a surprise.
Three principles sum up the topic:
- Juros de obra only exist when the bank has already released money during construction; when you pay the developer directly, what runs is the INCC.
- The heaviest weight is at the end of construction, when almost the whole balance has been released, and every month of delay is expensive.
- The contract sets the start, the end and who pays during a delay; the law and the STJ limit charges after the deadline.
A step for tomorrow: ask the bank or its correspondent for the development's construction progress schedule and redo the simulation with your contract's real rate.
If you want to compare off-plan bank financing with paying the developer directly for a specific development, book an online consultation or schedule a site visit to see construction progress up close.
If you know the math before you sign, construction phase interest holds no surprises.
Run the numbersOff-plan property or fixed income: compare the same moneyCDI: 13.65% a year (Central Bank of Brazil, 01/10/2026)Open the calculator
