Construction loan interest rates fluctuate, usually in conjunction with prime interest rates—although with some loans, the rate can be locked in for a certain period. Even so, in general, they are typically higher than traditional home mortgage loan rates because construction loans are considered riskier: There is no existing residence to use as collateral in case the borrower defaults. Interest rate ranges will differ based on whether you have a stand-alone construction loan or a construction-to-permanent loan; overall, these loans run at least 1%—and sometimes 4.5% to 5%—more than regular mortgage rates.