Finance
A 'construction loan' in Louisiana is typically characterized by:
AA fixed 30-year repayment schedule from the start
BShort-term financing with draws made as construction progresses, converting to a permanent mortgage at completion✓ Correct
CNo interest until the building is 50% complete
DZero down payment for qualified builders
Explanation
A construction loan is a short-term loan that funds construction in draws as work progresses. Upon completion, it typically converts to a permanent mortgage ('construction-to-permanent' loan).
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Math Concepts
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