A construction loan, also known as a self-build loan, is a short-term loan used to finance the construction of a home or other real estate project. Once long-term financing is secured, the contractor or home buyer must take out a construction loan to cover the building costs. A construction loan typically has a higher interest rate than a conventional mortgage loan, since its considered riskier.

Construction loans are typically taken out by contractors or a homebuyer who custom-build their own home. They are short term loans, usually for one year. The borrower may either refinance the construction loan into a permanent mortgage or receive a new credit to pay off the construction loan, called the "end loan", after the construction of the house is complete.

The borrower would only be asked to pay interest on a construction loan when the project is still underway. Many construction loans can require payment of the balance in full by the time the project is complete.

Eligibility

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