Most of the construction related loans that our company does are all construction/permanent loans.  The reason being, there is one closing greatly reducing closing costs.

Once the construction period is complete the borrowers sign a modification agreement, which is the final step that the construction loan is complete and now the permanent or end loan can now begin based on the terms and conditions agreed upon between the borrowers and the lenders.

During the construction period interest is paid on a monthly basis, only on the monies used thus far.  The interest rate most often is attached to the prime rate.

The end loan or permanent loan normally would get locked in between 30 and 60 days prior to the end of construction.  In order to optimize the best rate available at that time.