Construction-to-Permanent Loan (Single-Close)

A construction-to-permanent loan, often called a single-close loan, provides financing for both the construction phase and the long-term stabilized mortgage in one loan commitment and one closing. The loan converts automatically or upon completion from a construction credit facility with periodic draws and interest-only payments into a permanent amortizing mortgage. Underwriting covers both phases, including construction budget, draw schedule, and permanent loan sizing, and documents address conversion triggers, interest reserve mechanics, completion requirements, and conditions precedent for the permanent term.

Sponsors choose a single-close construction-to-permanent loan when they want to avoid the time and cost of refinancing between construction and stabilization. In practice, borrowers and brokers present construction budgets, contractor contracts, and stabilized pro formas to the lender so the permanent terms can be underwritten up front. Loan agreements will specify inspection milestones, completion covenants, and conversion conditions so that once the project meets those requirements the lender moves the loan from the construction tranche to the permanent amortizing schedule without a separate closing or new closing costs.

Single-close construction-to-permanent loans reduce execution risk and closing costs by eliminating the need to refinance at stabilization, which can be particularly valuable in volatile markets. They provide certainty on permanent terms and minimize timing risk between project completion and long-term financing. For lenders and sponsors, however, single-close loans require comprehensive underwriting for both construction and permanent phases, including contingency planning for cost overruns and schedule slippage, making clear documentation and realistic construction schedules essential to avoid conversion complications.