A Construction-to-Permanent (C2P) Loan — often called a Single-Close Construction Loan — combines short-term ground-up construction financing and a long-term 15- or 30-year residential mortgage into a single closing transaction.
The loan operates across two distinct lifecycle phases: 1. Construction Draw Phase (Typically 6–12 Months): Instead of disbursing the entire loan at closing, the lender holds funds in a construction reserve and releases staged Construction Draws as the licensed general contractor completes verified building milestones (foundation, framing, mechanicals, drywall, final certificate of occupancy). During this phase, the borrower makes interest-only payments strictly on the cumulative dollar amount drawn to date. 2. Permanent Amortizing Phase: Once the local municipality issues the final Certificate of Occupancy (CO) and final inspection is signed off, the loan automatically modifies into a standard permanent amortizing mortgage without requiring a second closing or re-underwriting.