Full Definition
Construction loans fund ground-up development during the construction period. Funds are disbursed in monthly 'draws' as work progresses, with the lender verifying completion before advancing. Typical term: 12-24 months. Interest-only during construction. At stabilization, the loan is refinanced with permanent financing or the property is sold.
Related Terms
LTC (Loan-to-Cost)
Construction loan amount as a percentage of total project cost. Typical LTC ranges 65-80%.
Bridge Loan
Short-term (1-3 year) commercial loan used to acquire, stabilize, or reposition a property before permanent financing.
Build-to-Suit (BTS)
Development model where a developer builds a property specifically designed for a committed tenant under a pre-negotiated lease.