Construction Development Loans are used by investors and real estate developers who use leverage to increase their rates of return and profit. They are short-term loans, usually for a period of only a year unless it is a large development project that will take longer to build. After construction of the property is complete, the borrower is required to payoff the construction loan or roll the loan into permanent financing through our one-time close construction development program.

The borrower may only be required to make interest payments on a construction loan while the project is still underway. Some construction loans allow you to roll the carrying cost into the loan which helps to limit the out-of-pocket expenses for the investor/developer while the project is being built.

With a construction loan funds are distributed as the project is being built by what is known as construction draws. Draws are associated with the completion of work through what is known as the critical path of construction which ensures proper building methods and materials are used. As the project is being constructed an inspector is sent to the site to confirm progress at which time, they approve the disbursement of funds for work that has been completed. These funds are usually paid by the lender right to the developer or general contractor performing the work.