Understanding Construction Loans

For many people, the idea of buying land and building their own custom home on it is very attractive. This, of course, requires a construction loan. Many people, however, do not understand how construction loans differ from regular mortgages. Well, construction loans are often interest only. They also are usually limited to one year. Instead of giving you a lump sum, the lender will often pay directly to the general contractor as certain milestones are met. At the end of the one year period, you must either refinance the property or sell it to satisfy the amount due.