Construction Loan
Short-term financing disbursed in stages as a building project reaches milestones, with the balance due at completion.
A construction loan is short-term financing released in installments, called draws, as the building reaches set stages of completion. Interest is usually charged only on the funds drawn so far.
When construction finishes, the balance is typically paid off by permanent financing, sometimes called a takeout loan.
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This definition is Texas real estate exam-prep education, not legal, tax, or professional advice. Verify current rules against the official source before relying on them for a real transaction. Back to the full glossary.