Loans
Construction Loan
A short-term loan used to finance the building of a new home. Funds are released in stages as construction milestones are met, and the borrower typically pays interest only during the construction period. Once the home is complete, the construction loan converts to a permanent mortgage or is paid off with a separate mortgage. Construction loans usually require higher down payments and credit scores than standard home loans.
Why It Matters
Understanding Construction Loan is a key part of choosing the right mortgage. The type of loan you select affects your monthly payment, how much interest you pay over the life of the loan, and how much flexibility you have if your financial situation changes.
When comparing loan options, pay attention to how construction loan fits into the bigger picture of your borrowing costs. A knowledgeable loan officer or mortgage broker can help you evaluate whether this option aligns with your financial goals and timeline.