What Is A Construction Perm Loan?

Like the man says, a blueprint is not a house – so conventional home mortgages don’t apply to construction projects.

However,  most blueprints become houses  – so loans that cover construction, then convert to permanent mortgages or “construction perm” loans are fairly common.

The construction loan phase is frequently a variable-rate loan, with scheduled loan “draws” to match construction stages. Upon completion – usually a certificate of occupancy – commonly called a “CO” –  the construction loan is converted to a permanent mortgage.

The advantage of construction perm loans is that you only need ONE application and ONE closing. Compare interest-rate trends to your construction schedule (and assume construction delays) to evaluate if a rate-lock agreement on the permanent mortgage stage makes sense. And weigh your construction-loan terms and their short-term cost against your mortgage rate, and its probable long-term costs. Compare lenders to get the best “construction perm” package for your situation.