Finance
In NJ, a 'construction-to-permanent' loan allows a borrower to:
ABuy a commercial building and convert it to residential
BFinance construction with a short-term construction loan that automatically converts to a permanent mortgage upon completion without a second closing✓ Correct
CObtain a permanent mortgage before construction begins
DOnly refinance an existing property
Explanation
A construction-to-permanent (C-to-P) loan combines construction financing with a long-term mortgage in one loan product. During construction, only interest is paid on drawn funds; upon completion, the loan automatically converts to a permanent mortgage without a new closing.
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Key Terms to Know
Discount Points
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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