Typically include higher interest & financing includes costs of construction. The loan begins with a Lender paying a contractor in installments/draws. Once finished it is often transferred/financed into a normal Mortgage Loan.
There are 3 types of Construction Loans:
Construction-Permanent:Also known as a Single One-Close Loan, these are most suitable for consumers who have a well thought out plan & want an interest rate that are prepared for or one that is predictable.
Construction Only Loans:Also Known as a Two Close Loan, this is paid when construction is complete. Borrower must get approved & also pay closing costs multiple times throughout this process. This is a good fit & most suitable for ones who have substantial assets & reserves.
Renovation Construction Loan:With this loan the renovations are typically financed into the mortgage & property is evaluated using After Repair Value (ARV).