Construction loans aren’t mortgage loans. They are instead loans issued for the term of a construction to finance the construction of a home. At the completion of the construction of the home, the construction loan is then repaid with a mortgage loan. There are specific requirements regarding construction loans – there must be appraisals made from a construction valuation expert in order to determine how much the cost of construction will be. This includes the price of the land, as well as the construction of the home, materials, and contractors.


Construction loans are, of course, for those wishing to finance the build of a new home. They often carry higher than average interest rates and short, time constraints on repayments. There are alternatives, such as having the builder carry the construction loan. Both options should be discussed with your friendly (and well-informed) mortgage lender, who can help you make the most qualified decision (that’s me!)