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Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
A short-term loan used to finance the building of some real estate project. The builders take out a construction loan in order to begin the project while they obtain long-term funding. Because there is no guarantee that the builders will be able to obtain long-term funding and a construction loan is not intended to fund an entire project, construction loans are fairly risky, and, as a result, have high interest rates.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
A short-term mortgage taken to finance the construction of a real estate project before permanent long-term financing is obtained. Because of its relatively high return, some real estate investment trusts specialize in this type of loan. Construction loans are often more risky than long-term mortgages.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
construction loanA loan originated for the purposes of providing payment for construction work or subdivision development.See also building loan agreement.
The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.