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Coming to Terms with Construction Loan Jargon

Who doesn’t like to personalize their new space and build a home? However, construction can be a costly prospect. Fortunately, construction loans can offer you the necessary funds to purchase land and pay for the labor and materials that go into building a new house.

With that being said, the construction loan industry has its own jargon. Here, our hard money construction loans expert demystifies some of the key terms used in this industry so you can make an informed decision when it comes to getting these loans!


Unlike a spec home, a presale home is bought before the construction.


Spec is defined as a type of home that’s built ‘on speculation,’ in accordance with market trends. Often, you’ll find these homes as part of big subdivisions. To ensure predictable timelines, uniformity, and efficiency, standard finishes and set plans are used (with the options to upgrade).


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This type of construction loan is quite common. It means, during the process of construction, you’re just required to pay the interest of the loan at every draw, until the project’s completion.

Construction only

It’s a loan that can’t be converted to a mortgage and must be paid in full when the construction is complete.


It’s a construction loan that’s converted to a mortgage at closing (unlike an end loan). For example, a build-to-rent loan. In construction-to-permanent loans, the interest rates can remain stable.

End loan

An end loan is used to pay off the construction loan. It’s a new loan that’s acquired when the home is completed.


It’s a third-party value estimate. Since the structure isn’t built, lenders base appraisals on the lot’s value, construction plans, and by making comparisons to market trends and similar properties.

Down payment

Down payment is the initial cash payment, which is a percentage of the full purchase of a high-cost item, which is usually a home – in this case, it’s the home’s construction. On construction loans, down payments tend to be all or some of the land cost.


Draws are pre-determined increments at which the lenders offer some money to the contractor or borrower. Draws are based on the completion of work, making sure the project progresses as planned. For instance, a draw of $30,000 may be offered after the installation of electrical components is completed, and another will be given after the framing has gone up.

Get a great source of capital at competitive rates with Insula Capital Group’s hard money construction loans

Real estate buildings, developers, and investors can view a plot of land and visualize the structure that deserves to be there. Insula Capital Group can breathe life into that visualization with their hard money construction loans. This way, our hard money lenders in NYC help experienced investors reach their goals.

Give us a call now for more information on our private financing in New York!