Glossary

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Construction Loans

Construction loans are used to finance the building of a new home or property. They are considered story loans, which means the lender has to study and approve your construction plans before giving you the money. Many construction loans involve interest-only plans wherein you only pay interest during the construction, and pay off the principal upon completion. Others allow you to convert it to a mortgage loan after the construction. You can also choose to finance the land purchase along with the construction loan. If you own the land, it can be used as equity on the loan.