Construction loan with take-out refers to short-term financing of real estate construction followed by long term financing, called a "take out" loan. This "take out" loan is issued upon completion of improvements. Construction loans normally work together with take-out loans.
- The land developer gets a construction loan to build a cluster of homes.
- When all the homes are ready to sell, a buyer gets a take-out loan from a lender to purchase one of the new homes.
- The builder uses part or all of the money from the sale towards paying off the construction loan.
The disbursement of the take out loan is contingent upon completion of construction and, in most instances, needs to be applied toward the preceding construction loan.
There are funding sources in our directory that provide this type of interim financing.