Construction to Permanent Loan Program

Construction to Permanent Loan Benefits

The Construction to Permanent mortgage loan provides a very unique financing solution for the purchase of your new home.

A Construction to Permanent loan is a mortgage loan designed to accommodate the construction phase of  your new home.  It provides for a one-time closing and allows interest only payments during the construction phase. The process consists of two phases, the construction phase and the permanent phase.

As construction proceeds, progress payment requests are submitted to the Bank by the Builder based on the pre-defined schedule of disbursements.  Independent inspections are ordered and evaluated by the Bank to determine the completion of work. Funds are disbursed in accordance with the pre-defined draw schedule for completed work only. Upon completing 80% of the construction of the home, a letter is sent to the home buyer and builder to remind all parties of the steps necessary to modify to permanent financing.

Although the buyer’s permanent interest rate is “locked in” at the beginning of construction, an option may be available to review the prevailing interest rates 30 days prior to the time of conversion to determine if a better rate is available and float down accordingly.

Permanent rate protection throughout the construction phase is standard!

The following is a list of advantages that make this option an extremely popular choice for today’s discriminating homebuyers:

• Permanent Interest Rate Lock: One of the primary features of the CP loan program is the ability to lock your permanent interest rate at the start of construction. Depending on the specific loan program selected you will typically pay no additional discount or advance lock fees. In a period of rising mortgage interest rates this feature can dramatically improve your buying power and potentially save you thousands of dollars every year. Most important is the confidence of knowing your rate issecure from the beginning.

• Construction Loan Interest Deductions: During the construction period all interest is paid by us as part of the price of the home. This interest although paid by us is deductable by you on your current year income taxes. The mortgage interest deduction is an deduction for all home owners, particularly if your home has been sold. This provision provides a continuation of this important tax benefit or additional tax savings as a second home mortgage deduction if you still own your primary residence.

• Transfer and Recordation Taxes Savings: The CP Option allows us to transfer only the land rather than the house and land combined substantially lower the your closing costs. Why waste your valuable equity on taxes?

• Builder/Seller Savings Credit: Depending on the particular lot and its status you may also be eligible for a special savings discount which can be applied to the purchase price or closing cost allowance for your lot. See Community Sales Manager for specific lot applicability.

• One-time Closing and Settlement: The CP loan often times has only one closing or settlement. Once construction is completed your loan goes through an automatic modification converting from construction loan to permanent loan. Any required paperwork is processed by us on your behalf. All you have to do is move in, sit back and enjoy your new home.

• Financial Security: The CP option provides with the security of ownership. You take direct possessionof the lot and we build the home of your choice on your lot. The mortgage lender advances construction draws or advances from the loan only after the work is in place.

To find out if this program is right for you, we encourage you to discuss this option with our community sales manager who can recommend one of several preferred lenders who specialize in CP financing. Like so many other who also selected this option, we are confident that you will you will find this to be a great way to save money and for Covell Communities to add value to your home buying experience.

Please check with your personal tax advisor to see if these advantages work with your specific tax situation.