Construction to Perm
Completed construction roll out into a more stabilized program long term. Construction to permanent loan.
Construction To Perm
- Securing a commercial construction to permanent loan towards the end of the construction phase offers a seamless transition from construction financing to a long-term mortgage, ensuring that funding continuity is maintained without the need for separate loan agreements.
- This approach locks in permanent financing terms early, potentially capturing favorable interest rates and reducing the overall financial uncertainty associated with future market fluctuations.
- Additionally, it simplifies the financial management of the project by consolidating the construction and permanent financing phases into a single loan structure, thereby minimizing closing costs and administrative burdens.
CONSTRUCTION TO PERM
Construction to Perm Program Details
Interest Rate:
Limitations:
Finished Project or six months to completion. This program is not available in California or New York.
Loan-To-Cost / Loan-To-Value:
Calculated based on deal.
Property Type:
Multi family, Retail, Industrial, Self Storage, Office* (*under certain circumstances)
Frequently Asked Questions
Borrowers often inquire about the unique structure of a construction-to-permanent loan, which combines the construction loan and permanent mortgage into one financing package, allowing them to understand how this approach streamlines the financing process for new construction.
During the completion of the construction project, a second set of financing, separate from the construction itself is needed, which includes different loan agreements. Hence this program as the followup after a construction or development project is complete.
The loan typically converts from construction to permanent financing upon the completion of the construction project. This transition requires several key steps:
Completion of Construction: The project must be fully completed according to the initial plans and specifications agreed upon at the start of the loan. This includes passing all required inspections and obtaining any necessary certificates of occupancy.
Final Inspection: A final inspection is often required by the lender to ensure that the construction has been completed satisfactorily and is in compliance with local building codes and regulations.
Certificate of Occupancy: Obtaining a certificate of occupancy (or its equivalent) from the local government is crucial. This certificate confirms that the building is legally habitable and meets all the required safety and zoning standards.
Once these conditions are met, the lender will typically convert the construction loan into a permanent mortgage. The terms of this mortgage, including the interest rate, repayment schedule, and any other conditions, would have been determined at the outset of the construction loan agreement. The borrower then begins making regular mortgage payments according to the terms of the permanent financing.