Loan Programs › Construction-to-Permanent Loans
Construction-to-Permanent Loans
Florida Luxury Lending — Loan Program Guide
What Is a Construction-to-Permanent Loan?
A construction-to-permanent loan finances the building of a custom home and then automatically converts into a standard mortgage once construction is complete — combining what would otherwise be two separate loans (a construction loan and a permanent mortgage) into a single process with one closing.
For luxury buyers building a custom estate, waterfront home, or architecturally distinctive property — common in Florida's high-end new-construction market — this structure avoids the cost and complexity of financing the build and the permanent mortgage separately.
How Construction-to-Permanent Loans Work
Two phases, one loan. During construction, the lender disburses funds in stages ("draws") as building milestones are completed. Once the home is finished and a certificate of occupancy is issued, the loan converts to permanent financing without a second closing.
Interest-only during construction. Borrowers typically pay interest only on the funds that have been drawn so far during the build phase, rather than on the full loan amount, which helps manage cash flow while the home isn't yet livable.
Builder and plan approval. Lenders will typically require an approved, licensed builder, detailed construction plans, and a fixed-price contract before approving the loan — the lender is underwriting the project, not just the borrower.
Down payment. Down payment requirements are generally higher than a standard purchase mortgage, often 20–30%, reflecting the additional risk of financing a project that doesn't yet exist.
Appraisal basis. Because there's no completed home to appraise initially, the lender bases the loan on the projected completed value, working from the plans and builder's contract.
Who Typically Uses Construction-to-Permanent Loans
- Buyers building a custom luxury home on a purchased lot
- Buyers tearing down and rebuilding on an existing waterfront or high-value lot
- Borrowers who want a single closing and predictable transition from build to permanent financing
- Buyers working with a specific architect or builder rather than purchasing an existing spec home
What to Expect in the Process
The approval process is more involved than a standard purchase, since the lender is evaluating the builder, the plans, and the budget alongside the borrower's financial profile. Timelines depend heavily on the build itself — delays in construction can affect the draw schedule and overall loan timeline, so working with an experienced builder and a lender familiar with construction lending helps keep the project on track.
Frequently Asked Questions
How is a construction-to-permanent loan different from a standard construction loan?
It combines the construction loan and the permanent mortgage into a single loan with one closing, rather than requiring two separate loans and closings.
How are funds disbursed during construction?
Funds are released in stages, or "draws," as building milestones are completed, and the borrower typically pays interest only on funds already drawn.
Do I need an approved builder before applying?
Yes, most lenders require an approved, licensed builder, detailed construction plans, and a fixed-price contract before approving the loan.
Rates, terms, and qualification requirements vary by lender and are subject to change. This page is for general informational purposes only and does not constitute a loan offer or financial advice. Consult a licensed mortgage professional to discuss your specific situation.
