For your benefit, I've put together a primer on construction loans.. the bank doesn't ask you to start paying down the principal until then either.. variable interest rates that correspond to a certain percentage over the prime.
5 Down Construction To Permanent Loan secured construction loan house construction loan How Construction Loans Work: The Basics. I’ll start by separating construction loans from what I’d call "traditional" loans. A traditional home loan is a mortgage on an existing home, that generally lasts for 30-years at a fixed rate where the borrower makes principal and interest payments for the life of the loan.Most often, construction loans are short-term loans (one year or less) that turn into a longer, more conventional mortgage when building is complete. The larger part is usually 15 or 30 years. With a construction loan secured, you will receive installment payments for that first year of building.