A single loan that funds construction and converts to permanent debt at completion.
A construction-to-permanent (CTP) loan is a single loan with two phases: a construction phase (interest-only, with draws) and a permanent phase (amortizing, traditional mortgage). The loan closes once at the beginning; at completion, it automatically converts to the permanent phase without re-underwriting or re-closing. CTP simplifies financing on owner-occupied construction and some investment properties.
CTP loans solve a real problem: two-phase financing is complicated. Traditional construction loans require the borrower to refinance into permanent debt at completion — meaning a second underwriting process, second appraisal, second set of closing costs, and risk that perm financing won't be available at the terms expected. CTP wraps both phases into one closing, eliminating that risk.
Owner-occupied SFR construction is the most common CTP use case. The borrower is building their primary residence — they want to lock in long-term rate at the start of construction, not wait until completion. CTP locks the permanent rate at original closing (typically with a small rate premium for the rate lock) and provides certainty throughout the build.
Investment property CTP is less common but available. Some DSCR programs offer construction-to-perm structures for rental property builds. The loan funds construction, converts to a DSCR-qualified rental loan at completion, and the property is leased up post-CO. The borrower benefits from one closing; the trade-off is rate (typically slightly higher than separate construction + DSCR financing).
Key CTP considerations: the permanent phase rate is set at original closing (sometimes with extension provisions if construction takes longer than expected). The permanent phase amortization is calculated based on expected completion value or projected NOI on investment property. Conversion triggers are typically CO + final inspection + appraisal confirmation. If the property fails to deliver at expected value, the conversion may require modifications.
| Borrower's primary residence build | |
| Total project cost | $650,000 |
| Loan amount (80% of completion value) | $520,000 |
| Construction phase (12 months) | |
| Rate | 8.50% (IO) |
| Funded via draws as work completes | |
| Interest paid from reserve | |
| Conversion at CO | (automatic) |
| Permanent phase (30 years) | |
| Rate | 7.25% (locked at original closing) |
| Monthly P&I | $3,547 |
| Single closing cost | ~$12,500 (vs $20k+ for two closings) |
A single loan with two phases: construction (interest-only, with draws) and permanent (amortizing 30-year mortgage). The loan closes once and automatically converts at completion.
One closing, one set of closing costs, rate locked early, and certainty that perm financing will be available at completion. Eliminates the risk that rates rise or program availability changes during construction.
Usually slightly — typical premium is 25–75 bps over the best available perm rate at conversion. The premium pays for the rate lock during construction.
Yes on some programs — some DSCR lenders offer CTP structures for rental property construction. Less common than owner-occupied CTP but available.
Most CTP loans include extension provisions (typically 3–6 months) with fees. If construction substantially exceeds the originally agreed timeline, the perm rate may need to be reset to current market.
Matrix offers both CTP and separate construction financing structures. We help borrowers choose the right approach based on hold strategy and rate environment.
