Construction-to-Permanent Loan Calculator

Model both phases of a C2P loan — the interest-only construction phase and the permanent mortgage. Compare single-close vs two-close costs, calculate draw schedule interest by milestone, analyze rate lock risk, and stress-test cost overrun scenarios.

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Monthly Payment (Permanent Phase)
$2,076
Loan amount: $320,000 · 12-month build phase
Total Project Cost
$400,000
Down Payment (20%)
$80,000
Construction Interest (est.)
$12,800
Single-Close Closing Costs
$4,500
Two-Close Total Closing Costs
$9,000
Closing Cost Savings (Single-Close)
$4,500
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Single-Close C2P
$17,300
Closing costs: $4,500
Construction interest: $12,800
ONE closing — rate locked at start
Pros: One set of closing costs, rate certainty, simpler process
Cons: Rate may be slightly higher; less flexibility to shop permanent loan
RECOMMENDED — saves $4,500
Two-Close Construction Loan
$21,800
Construction closing: $4,000
Permanent closing: $5,000
Construction interest: $12,800
TWO closings — re-qualify at end
Pros: Can shop for best permanent rate after build; rate may be lower
Cons: Two closings, re-qualification risk, rate uncertainty
Permanent Payment (Single-Close)
$2,076/mo
Permanent Payment (Two-Close)
$2,102/mo
Assumes 0.125% higher rate (re-qual risk)
Closing Cost Difference
$4,500
Single-close saves on closing
Build Period
12 months
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Production Builder
$447,500
Builder price: $350,000
Contingency (5%): $17,500
Land: $80,000

Build time: 6-9 months
Customization: Limited
Monthly payment: $2,322
Custom Build
$402,000
Build cost: $280,000
Contingency (15%): $42,000
Land: $80,000

Build time: 12-18 months
Customization: Full control
Monthly payment: $2,086
Total Cost Difference
$45,500
Custom build is cheaper
Monthly Payment Difference
$236/mo
Custom has lower payment
Builder Contingency (5%)
$17,500
Standard production builder
Custom Contingency ({contingencyPct}%)
$42,000
Typical custom build reserve

How Construction-to-Permanent Loans Work

A construction-to-permanent (C2P) loan has two distinct phases. During the construction phase — typically 6-18 months — you draw funds in stages as milestones are completed and pay interest only on disbursed amounts. When construction is finished and you receive a certificate of occupancy, the loan converts to a permanent mortgage and you begin making standard principal-and-interest payments.

The single-close advantage is significant: one closing, one set of closing costs, and your interest rate is locked before ground breaks. You will not face re-qualification or rate uncertainty when the build is complete.

Single-Close vs Two-Close: Cost Formula

Single-Close Total Cost = Closing Costs + Construction Interest (on avg drawn balance)

Two-Close Total Cost = Construction Closing + Permanent Closing + Construction Interest

Construction Interest = Avg Loan Balance × Construction Rate × (Build Months ÷ 12)

Avg Loan Balance ≈ Total Loan × 50% (draws disbursed evenly over time)

Example: $400,000 Build, 12-Month Construction Period

C2P Single-Close vs Two-Close Comparison

Land Cost$80,000
Construction Cost$320,000
Total Project$400,000
Down Payment (20%)$80,000
Loan Amount$320,000
Construction Rate8.0%
Permanent Rate6.75%
Build Period12 months
Avg Draw Balance$160,000 (50%)
Construction Interest$12,800
Single-Close Closing Costs$4,500
Two-Close Total Closing Costs$9,000
Single-Close Total Extra Cost$17,300
Two-Close Total Extra Cost$21,800
Single-Close Savings$4,500

On this example, the single-close C2P saves $4,500 in closing costs versus the two-close approach, with similar construction interest in both scenarios.

Construction Draw Schedule Explained

Lenders release construction funds in 5-7 draws tied to verified milestones. A typical schedule for a custom home:

Foundation & Site Work20% of loanAfter foundation poured and inspected
Framing25% of loanAfter walls, roof structure complete
Mechanical / Plumbing / HVAC20% of loanRough-in complete, passed inspection
Drywall & Exterior15% of loanExterior finished, drywall hung
Finishes & Interior15% of loanCabinets, flooring, fixtures installed
Final Completion5% of loanCertificate of occupancy issued

Interest accrues only on drawn amounts. Your monthly interest payment starts low (20% of loan outstanding after draw 1) and increases progressively until the loan is fully disbursed at completion.

Frequently Asked Questions

A C2P loan combines a construction loan and a permanent mortgage into one product with a single closing. During construction you pay interest only on drawn amounts. When construction is complete, the loan automatically converts to a standard 15- or 30-year mortgage without a second closing or re-qualification. This simplifies the process and protects you from rate changes during the build period.
Most construction loan lenders require 20-25% down on the total project cost (land + construction). Some lenders require 10% if you have excellent credit and the project is a production builder home. FHA and VA loans have lower down payment options for construction but with additional requirements. The land you already own can sometimes be counted as equity toward the down payment requirement.
Yes. If you own land free and clear, its equity can often satisfy the down payment requirement for a construction loan. The lender will appraise the land, and its value counts toward your equity contribution. You will still need a signed construction contract, builder approval, and plans/specifications. This is one of the most common C2P scenarios — land purchase followed by custom build financing.
The primary risk is re-qualification. When construction is complete, you must apply for a new permanent mortgage. If your financial situation has changed — job change, new debt, income reduction, or credit score decline — you may not qualify at the same terms or at all. Additionally, interest rates may have risen significantly during the 12-18 month build, increasing your permanent payment substantially. Single-close C2P eliminates both risks.
Before each draw, a bank-appointed inspector visits the site to verify the milestone is complete. Once verified, the lender releases funds — either directly to you (owner-builder) or to your contractor. The process typically takes 3-7 business days per draw. You will be responsible for the inspection fee (usually $75-$150 per inspection). Budget for 5-7 inspections over the construction period.

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