Construction Loan with Takeout

Construction loan with takeout refers to short term financing of real estate construction followed by long term financing, called a "take out" loan. This "take out" loan is issued upon completion of improvements. Construction loans normally work together with take-out loans.

For example:

•  The land developer gets a construction loan to build a cluster of
    homes.
•  When all the homes are ready to sell, a buyer gets a take-out loan
    from a lender to purchase one of the new homes.
•  The builder uses part or all of the money from the sale towards
    paying off the construction loan.
•  The disbursement of the take out loan is contingent upon
   completion of construction and, in most instances, needs to be
   applied toward the preceding construction loan (interim financing).

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