Mortgage Glossary
Construction Loan
Defined by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
A construction loan is short-term financing that funds the building of a home in stages, converting to or being replaced by a permanent mortgage when complete.
What Construction Loan means
Funds release in draws as construction milestones are met, and you typically pay interest only on the amount drawn. A construction-to-permanent loan rolls into a regular mortgage once the home is finished.
Florida example
A Florida buyer building in a new Polk County development draws funds for foundation, framing, and finish work, paying interest on each draw. At completion and certificate of occupancy, the loan converts to a 30-year fixed mortgage.
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