A Construction Loan is a money borrowed to finance the construction of a home. This type of loan typically offers the ability to pay only interest during the period of construction. Throughout this period, the money is incrementally advanced as construction progresses. Like commercial loans, construction loans are typically short-term, as they are designed to be used during the time of construction. A lender will usually request to see a construction timetable including plans and a detailed budget during the loan application process.
Upon the construction’s completion, the borrower’s liability usually rolls over into a mortgage. The exact terms of this mortgage should be discussed with a professional to make sure that the best agreement is reached.
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