construction loan

Related Terms
Short-term (usually 3 years) real estate financing secured by a mortgage on the property being financed. This loan is meant to cover the cost of land development and building construction, and is disbursed (1) as needed, (2) as each stage is completed, (3) according to a prearranged schedule, or (4) when some condition is met. Construction loans are paid off from the proceeds of permanent financing (usually for 20 to 30 years), which in turn is repaid from the cash flow generated by the completed building, and is arranged before the construction loan is disbursed. Also called building loan, construction mortgage, or development loan.

Use 'construction loan' in a Sentence

In order to build the property on that location, we needed to get a construction loan, so it would all be legal.
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The construction loan taken out by the firm was required as the capital requirements were quite large to fund this project.
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If you want to build a new site for your business but don't have the capital ready you may be able to take on a construction loan.
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