Definition
A specialized loan that combines construction financing with a permanent mortgage into a single instrument, converting automatically at completion.
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Find my pathAbout this term
Construction-to-permanent loans (often called 'construction-perm' or one-time close loans) finance both construction and permanent mortgage. Reduces closing costs by eliminating separate closings. Interest rates are typically fixed for the entire term. Borrower benefits from single approval process and known final mortgage terms. Lenders require detailed plans, cost estimates, and property appraisals. Increasingly popular for new construction financing.
Pro Tip
Construction-to-permanent loans simplify financing and reduce costs—compare rates carefully with traditional construction and refinance options.
Example
A homebuyer obtains a construction-to-permanent loan for $400,000, covering construction with interest-only payments, converting to 30-year mortgage at completion.