Construction-to-Perm Loan Payment 2027 Calculator

What is a construction-to-permanent loan?

A construction-to-permanent (C-to-P) loan finances both the construction phase and the final mortgage in a single product. During construction (typically 6-12 months), the loan operates as an interest-only line of credit — the lender disburses funds to the builder in scheduled "draws" as construction milestones are completed (foundation, framing, drywall, finish). You pay interest only on the outstanding drawn balance, not the full project amount. Once construction is complete and the home is certified for occupancy, the loan automatically converts to a permanent 15-30 year amortizing mortgage at the pre-locked rate.

Single-close C-to-P loans eliminate the need for two separate closings (saving $3,000-$8,000) and lock in the permanent rate at the start — protecting you from rate increases during the build. The trade-off: the permanent rate is typically 0.25%-0.50% higher than an end-loan refinance because the lender takes on the construction risk.

Construction phase: interest-only payments grow monthly

During construction, your monthly payment is calculated on the OUTSTANDING DRAWN balance — not the full loan amount. As the builder completes work and draws more funds, your interest-only payment grows. Example:

• Month 1: Lot draw $120k, payment $950 (interest only at 9.50%)
• Month 3: Foundation done, $200k drawn, payment $1,583
• Month 6: Framing + roofing, $300k drawn, payment $2,375
• Month 9: Near complete, $400k drawn, payment $3,167
• Month 10: Full $450k drawn, payment $3,563 (final interest-only month)

Total interest paid during a 10-month construction on a $450k loan with average $260k outstanding: approximately $20,000. This is paid out of pocket monthly, in addition to any rent or current mortgage you're still paying. Budget for the dual housing cost during construction.

Conversion to permanent loan

Once construction is complete (certificate of occupancy issued, final inspection passed), the loan converts automatically. Most single-close C-to-P products allow:

• Float-down option: If permanent rates have dropped during construction, you can capture the lower rate (one time, fee may apply $500-$2,500)
• Rate lock extension: Standard locks are 12 months; extensions cost 0.125%-0.25% of loan for additional months if construction runs over
• Re-amortization: Loan now amortizes over 15, 20, or 30 years starting from conversion date

Single-close vs two-close: which to choose?

Single-close C-to-P wins when: rates are rising or volatile (locked rate protects you), you want to minimize closing costs, you have a tight timeline. Two-close construction + end loan wins when: you expect rates to drop significantly during build (you can shop better when ready), you want maximum flexibility on the permanent loan (different lender, jumbo conversion, etc.), the construction loan rate is much lower with a stand-alone lender (sometimes prime + 0.5%).

Two-close adds approximately $4,000-$8,000 in second-closing costs but can save $10,000+ in interest over 30 years if you secure a meaningfully better permanent rate.

Source: Fannie Mae Selling Guide B5-3.1 (Construction-to-Permanent Financing), MBA Construction Lending Survey 2026.