A construction loan can take six to twelve months from foundation to final walk-through, and mortgage rates rarely stand still that long. The way your financing is structured—one-time-close versus two-close—determines whether you ride out rate volatility or face it twice.
How the one-time-close structure works
In a construction-to-permanent loan (often called a single-close or one-time-close), you close once, lock your rate at that initial closing, and the loan automatically converts to a standard permanent mortgage when construction finishes. You underwrite once, pay closing costs once, and your interest rate is set before the first shovel hits dirt. During the construction phase you typically make interest-only payments on funds already disbursed; when the certificate of occupancy is issued, the loan converts and you begin regular principal-and-interest payments at the locked rate.
Extended lock periods and their cost
Because construction timelines rarely fit inside a standard 30- or 45-day lock window, one-time-close lenders offer extended locks—commonly nine, twelve, or even eighteen months. Each month of extension carries a cost, often quoted as a percentage of the loan amount or as additional discount points. For illustration, a twelve-month lock might add 0.50 to 1.00 percent to your upfront costs compared to a sixty-day lock on a purchase of an existing home. These figures are illustrative; rates and products are subject to change and this is not a commitment to lend. That cost is insurance: if rates climb two percentage points during your build, you still close into the lower rate you locked months earlier.
What happens if construction runs long
Weather, permit delays, and supply-chain issues can push a ten-month schedule into fourteen. Most one-time-close programs include a lock-extension provision. If your builder misses the estimated completion date, you can usually extend the lock in 30- or 60-day increments for an additional fee—typically a fraction of a point per extension period. The lender may require updated documentation (pay stubs, bank statements) to confirm your financial position hasn't deteriorated, but you do not re-qualify from scratch or accept a new prevailing rate.
Two-close exposure: the alternative risk
Under the traditional two-close model, you take a short-term construction-only loan, then apply for permanent financing separately when the house is done. You face underwriting twice, pay closing costs twice, and—most critically—you lock your long-term rate only at the second closing. If rates have risen three percentage points during construction, your permanent mortgage reflects that new market. You also risk not qualifying the second time if income, credit, or debt ratios have shifted.
The Alliance take
One-time-close loans cost more upfront but eliminate refinance risk and rate uncertainty over a volatile build window. If you value predictability and plan to hold the loan long enough to recover the extended-lock premium, a single-close structure is usually the smarter play. Start an application to explore construction-loan options, or reach out with questions about how lock mechanics work in your scenario.