Construction loan

Bank loan for financing construction, disbursed in stages.

A construction loan is a specific bank financing for covering the costs of building a new property. Unlike a standard mortgage, the amount is not disbursed in one lump sum but released in stages as construction progresses.

Interest is calculated only on the amounts actually drawn, which reduces charges during the construction phase.

At completion, the construction loan is generally converted into a standard mortgage (fixed rate or SARON). This conversion takes place at market conditions at the time of transformation.

Banks generally require the same equity as for a standard mortgage (minimum 20%), calculated on the total project cost (land + construction).

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