For a construction-to-permanent loan where the borrower pays interest-only during the 12-month construction phase, how should the APR be calculated?
Correct Answer
C) Based on payments over the entire loan term including both phases
Under Regulation Z, construction-to-permanent loans are treated as single transactions, and the APR must reflect the payment schedule over the entire loan term, including both the construction phase interest-only payments and the permanent phase amortizing payments.
Why This Is the Correct Answer
Under Regulation Z, construction-to-permanent loans are treated as single transactions, and the APR must reflect the payment schedule over the entire loan term, including both the construction phase interest-only payments and the permanent phase amortizing payments.
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