A construction loan refers to a short-term financing option specifically designed to fund the construction or renovation of a property. It is a specialized type of loan that provides funds in stages or “draws” as the construction progresses, rather than disbursing the full loan amount upfront. It is a two-phase loan that combines the construction phase and the permanent mortgage into a single loan package.  Key benefits of Construction & Construction Permanent The total approved loan amount is not usually given to the borrower right away, in one lump sum. The construction loan operates like a line of credit from which a borrower can access funds (draw period) as needed at various stages of the construction project.  Easier to qualify. Less closing costs Interest-Only payments during construction draw period Flexible terms