The Loan That Builds Dreams

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Construction-to-Permanent Loan: The Loan That Builds Dreams

A Construction-to-Permanent loan is used in scenarios for remodels, renovations and a ground-up construction of a home. This loan is created in one closing with financing that helps with the construction and then converts to a regular loan on a home. There are many different Construction-to-Permanent loans you can get depending on your situation. Below are two scenarios that will help you envision this type of loan and its benefits to you as the borrower:

Scenario 1) A lot is unimproved with plans for a primary or secondary residence to be built.  

The mortgage amount owed will be on the lot plus the cost to build. The loan closing costs make up the entire loan amount. This scenario can be a purchase or refinance. A general contractor provides the cost estimate to be used. The appraisal is prepared and completed in an “as-complete” status on the home.  Work on the property will not start until the Construction-to-Permanent loan closes.

Scenario 2) Custom remodel or renovation.

In this scenario, a homeowner is looking to remodel or renovate their primary or secondary home. This can span anything from adding square feet, a major tear down or just adding simple improvements to the home. These can be purchase or refinance transactions. The most important aspect of these types of loans is finding a reliable contractor.

There are just two examples of scenarios borrowers will run into for a Construction-to-Permanent loan. If you are interested in learning more or need this type of loan, reach out to us today.

– Dave Horton, Mortgage Consultant