Construction loans have an interest-only phase during building. Points typically apply to the permanent phase on a construction-to-permanent loan.
The timing of when you pay points matters. On a single-close construction-to-permanent loan, you can lock the rate and buy points at the start. On a two-close loan, points apply to the permanent financing later. Patrick Kevin Fagan helps new construction buyers in San Antonio evaluate loan options.
Construction Phase
During the construction phase, you typically pay interest only on the amount drawn. Points are not directly relevant here because the interest rate is based on the permanent loan terms. On a single-close construction-to-permanent loan, you lock the permanent rate upfront, which includes any points. Patrick Kevin Fagan explains construction loan mechanics for San Antonio area homebuilders.
Permanent Phase Points
Once construction is complete and the loan converts to permanent financing, the points you purchased take effect. The rate reduction applies to the amortizing permanent loan. On a two-close loan, you have a separate lock and point decision for the permanent mortgage. Patrick Kevin Fagan helps buyers in San Antonio and the Texas Hill Country navigate construction loan point decisions.
CTP Loan Points
Construction-to-permanent (CTP) loans allow you to lock a rate and buy points before construction starts. This can be beneficial if rates are expected to rise during construction. However, you are paying upfront for a rate you will not use until construction is complete. The break-even analysis should account for this timing gap. Call 210-317-6514 to discuss your construction financing options.
