Construction Loan vs End Loan Comparison
Two paths for new construction: (1) Construction-to-permanent (one-time close, converts to mortgage after build). (2) Standalone construction loan + separate end loan (refinance to permanent). C2P saves closing costs (one loan), locks rate during build. Standalone gives flexibility to shop end loan rates separately.
Construction-to-Permanent Mechanics
C2P loan funds construction in draws (typical 5-7 draws as milestones met), then automatically converts to permanent mortgage on completion. Single closing, single set of fees, single underwriting. Rate locked at origination — protects against rate rise during build. Some C2P programs allow rate float-down if rates drop before conversion.
Standalone Construction + End Loan
Two separate loans: construction loan for build (typically 6-12 months interest-only), then refinance to permanent at completion. Pro: flexibility to shop end loan rates. Con: two closings = $10-15K total fees, qualifying twice (income, credit, appraisal). Risk: rates rise during build, you pay higher permanent rate.
When Each Wins
C2P wins when: rates may rise (lock current rate), you don't want to qualify twice, you want simplest process. Standalone wins when: rates may fall (chance to refi lower), you have time to shop end loan, your construction loan and permanent loan have very different optimal lenders. Recent rate environment (2024-2026 falling rates) has favored standalone slightly.
Source: Fannie Mae Selling Guide B5-3.1-02 (construction loans), Freddie Mac Single-Family Construction Lending Guidelines. Last updated: May 2026.