A construction loan is generally advanced across a series of milestones. This type of financing allows a borrower to borrow money to have a new property constructed as opposed to buying an existing one. A draw schedule is established up front, which determines when specifically the lender will advance funds based on which milestones need to be hit.

Once the construction is completed, the construction mortgage is either converted to a traditional one, or a refinancing of the property takes place with another lender to pay off the construction loan.

As with everything else, both institutional and private lending options are available.