Legal Definitions - building loan

A building loan is a type of bridge loan that is primarily used for constructing a building. The loan is usually given in parts as the work progresses and is used to pay the contractor, subcontractors, and material suppliers.

For example, if a person wants to build a house, they may take out a building loan to pay for the construction costs. The loan will be given in stages as the work progresses, and the borrower will use the funds to pay the builder, electrician, plumber, and other contractors.

Building loans are a type of short-term financing that is used to cover the costs of construction until more permanent financing is arranged.