Construction financing companies is made up of two phases - the construction phase and completion. An interim loan  is a short term loan to finance constructions costs, such as the building of a new home. THe lender basically advances funds to the borrower as nedded while the construction progresses. Since this type of loan is a high risk loan it has a high interest rate. Upon completion of the construction , the borrower must obtain permanent financing or pay the construction loan in full. The permanent loan that pays off a construction loan is called a takeout loan. Interim construction loans are usually made by commercial banks. Stanby commitments and take out loans are arranged by mortgage companies for large investors such as insurance companies. Do NOT confuse a take out loan with a standby commitment. A standby commitment is also known as a forward takeout commitment. A forward takeout commitment is just a very expensive letter that promises to deliver a takeout loan in the future if the property is built according to plans and specifications and leased at the target rental rate. Typically forward takeout commitment will cost a developer one-to-two points, plus at least one additional point if the loan eventually funds, but the borrower doesnt have to take the loan.

Are there any construction loan specialists on here? I have only come across two of these deals in my career.