Construction Loan
Also called: development finance, build loan, draw schedule
A construction loan funds building work in staged draws released as milestones are inspected, with interest paid only on what's drawn. It converts to a permanent mortgage on completion, or is refinanced. The lender is underwriting a plan rather than an asset, so it demands contingency reserves, fixed-price contracts and personal guarantees — and cost overruns are the borrower's problem, not the loan's.