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Construction-to-permanent loans vs investor construction loans
A construction-to-permanent loan is for a home you will live in. If you are building to sell or rent, you need a different loan. Here is the difference.
Get my termsNew construction loansWhat is a construction-to-permanent loan?
A construction-to-permanent loan (also called a one-time close or single-close loan) pays for building a home and then turns into a regular mortgage when the home is finished. It is made to people building a primary residence and usually needs 10% to 25% down, good credit and a licensed builder.
If you are building to sell or rent, a construction-to-permanent loan is usually not available. Investors use a short-term ground up construction loan instead, then pay it off from the sale or refinance into a rental loan. That is the loan we make: 90% of lot and build, no experience required.
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Estimate only. Loan amount is 90% of lot price plus build budget. Business-purpose loans on investment property, not homes you will live in.
Side-by-side comparison
| Feature | Construction-to-permanent | Investor construction loan |
|---|---|---|
| Who it is for | People building their own home | Investors building to sell or rent |
| Property use | Primary residence | Investment property |
| Closings | One closing | One closing, paid off at sale or refinance |
| Term | Becomes a 15 to 30-year mortgage | Short-term |
| Payments | Interest during build, then principal and interest | Interest-only |
| Builder | Licensed builder usually required | You can be the builder |
| Experience | Not applicable | None required with us |
When a construction-to-permanent loan fits
- You will live in the finished home
- You want one closing and a long-term mortgage
- You are hiring a licensed general contractor
We do not make these loans. A bank or mortgage lender is the right call.
When an investor construction loan fits
- You are building a spec home to sell
- You are building a rental or a duplex to keep
- You want to keep more cash: we fund 90% of lot and build
- You have never built before
Your build budget is paid in draws as each stage is finished. When the home sells, the loan is paid off.
Building a rental? Two loans, one plan
For homes you will keep, investors usually use a construction loan for the build, then refinance into a long-term rental loan once the home is finished and rented. See build to rent construction loans.
Questions builders ask
Straight answers about construction-to-permanent loans.
What is a construction-to-permanent loan?
A loan that pays for building a home and converts into a regular mortgage when the home is finished. It is for homes you will live in.
Can investors get a construction-to-permanent loan?
Usually not. These loans are for primary residences. Investors use a short-term construction loan and pay it off at sale or refinance.
Do you offer construction-to-permanent loans?
No. We make business-purpose ground up construction loans for homes built to sell or rent.
How much do you fund?
90% of the lot price plus the build budget. You bring the other 10%.
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