Phasing Breakdown
- Building Draw Phase: Funds disbursed in stages to contractors. Monthly payments are interest-only based on the drawn balance.
- Permanent Mortgage Phase: Loan converts into a standard 15 or 30-year amortizing mortgage upon certificate of occupancy.
Construction Loan Cost Projections ($450,000 Budget @ 7.5%)
| Build Phase (Avg 50% Drawn) | Duration | Monthly Payment | Phase Total Cost |
|---|---|---|---|
| Construction Build Phase | 12 Months | $1,406.25 / mo (Interest Only) | $16,875 (Build Interest) |
| Permanent Mortgage Phase | 30 Years | $3,146.42 / mo (P&I) | $682,711 (Permanent Interest) |
Frequently Asked Questions
How do construction loans work?
Construction loans provide short-term financing where funds are disbursed to builders in draw stages. Borrowers only pay interest on funds drawn during construction.
What is a construction-to-permanent loan (single-close loan)?
A construction-to-permanent loan combines the short-term construction financing and the long-term permanent mortgage into a single loan with one closing, avoiding dual closing costs.