A development loan (sometimes referred
to as construction loan ), is advanced by a
lender to a company for the specific purpose
of servicing and improving land to the point
of building construction. The term of the
loan is normally one to three years. The
payout of the loan occurs when the serviced
land is sold to builders or to a general
developer for the construction of new homes,
a plaza, or a rental project. Normally this
type of loan is not amortized over a
specific period of time, but takes the form
of a collateral loan with specific
guarantees, and interest only payments
throughout the mortgage term.
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