construction loan: meaning, definition, pronunciation and examples

It is typically paid off by taking out a new, long-term mortgage (often called the 'end loan' or 'permanent financing'). Some loans have a 'construction-to-permanent' feature that automatically converts.

Yes, generally. Lenders see them as riskier because the collateral (the house) doesn't exist yet. They require detailed plans, a solid budget, a qualified builder, and often a larger down payment.

Usually, you only pay interest on the amount of money that has been drawn (disbursed) to that point. Full principal-and-interest payments typically begin after conversion to a permanent mortgage.

Yes, major renovation or rehabilitation projects often use a similar product, sometimes called a 'renovation loan' or 'rehab loan', which functions on the same draw-based principle.

A short-term loan used to finance the building of a property, typically repaid or converted into a mortgage once construction is complete.

Construction loan is usually formal, technical, business in register.

Construction loan: in British English it is pronounced /kənˈstrʌkʃən ləʊn/, and in American English it is pronounced /kənˈstrʌkʃən loʊn/. Tap the audio buttons above to hear it.