A Construction-to-Permanent mortgage (CP loan) is a three-stage mortgage that allows you to finance the construction of your new home. A CP loan allows you to lock in your interest rate and close your loan before construction begins. Plus, there is only one closing with no need to re-qualify for the permanent phase of the loan.
During construction, disbursement is made to cover the cost to build and interest is paid only on the outstanding balance. When construction is complete, the loan converts to a permanent mortgage. At this point, scheduled monthly payments of principal and interest plus escrows, if applicable, will take effect.