Construction loan

Construction loans are usually taken out by builders or home buyers who are custom-building their own home  “Getting a Mortgage When Building Your Own Home”. After construction on the house is complete, the borrower can either refinance the construction loan into a permanent mortgage or get a new loan to pay off the construction loan sometimes called the “end loan”. The borrower might only be required to make interest payments on a construction loan while the project is still underway. Some construction loans may require the balance to be paid off entirely by the time the project is complete.
If a construction loan is taken out by a borrower who wants a home built, the lender might pay the funds directly to the contractor rather than the borrower. The payments may come in installments as the project completes new stages of development. Construction loans might be taken out to finance rehabilitation and restoration projects as well as to build new homes.