A construction loan is a type of short-term loan that is used to finance the construction of a new building or renovation of an existing property. This type of loan is typically used by individuals, developers, or businesses that are building a residential, commercial, or industrial property.
Construction loans are different from traditional mortgage loans in that they are usually interest-only during the construction phase, which typically lasts from six months to a year. Once the construction is complete, the loan may be converted to a conventional mortgage, or the borrower may need to obtain a new loan to pay off the construction loan.