Construction loan means the finance used for the construction of any kind. In some commercial construction the repayment has to be started after the project has been completed. In home construction loan is also called self-build mortgage. The lender’s main concern is how the construction loan will be repaid in monthly installments. The lender will assess that when the project is completed how much the rental income will come including the expenses and how much is the monthly income of the borrower. Whether the borrower will be able to repay the loan in monthly installment or not. The lender takes care of the risk if something goes wrong in the project and the project work is stopped and the borrower goes away from the project whether the lender would be able to recover the loan by selling the project or real estate. That is why the project is financed maximum up to 85% of the total cost of the project. Construction loans are often provided to the land developers where the profits and appreciations is estimated by the lenders where the builder will immediately sells the flats or apartments whether the Borrower will be able to repay the loan. In unforeseen circumstances will the lender realize the loan amount? If in case the lender has to sell the entire building to one buyer. Home loans interest is little higher than the prime interest rate. The construction loan are short-term loans for six months to two years, the interest rates may be variable a little. The borrower may get the interest rate on fixed rate or floating rate options. The repayment of loan starts when the occupancy certificate is issued. The best construction loan agreement should have very clear terms and conditions.