Construction Loan

A construction loan is a mortgage loan product designed for those who are would like a new home or investment property. It generally works as below:

You have purchased a vacant land or land with an old house to be demolished, and then you have arranged with a builder to build a house on it in an agreed timeframe. The builder would require you to pay 5% of the total construction cost as a deposit.
You apply for a construction loan and the application is approved.
The builder commences the construction.
The lender releases funds to the builder as progress is made.

You will only be charged interest on the actual drawn-down amount instead of the full loan amount. This can help you save money during the construction process.
Your cash flow is bettered managed as during the construction period, it’s interest-only payment.