What is a long-term loan used to repay a construction loan called?

A long-term loan used to repay a construction loan is known as a take-out loan. This type of financing is essential in situations where a borrower has initially taken out a construction loan to fund the building process of a home or property. Once the construction is complete, the take-out loan provides a more stable, long-term finance solution.

The take-out loan is typically secured through a traditional mortgage, which allows the borrower to repay the construction loan and own the property under a longer-term financing agreement, often extending for 15 to 30 years. This transition is crucial because construction loans are usually short-term and come with higher interest rates, which can be burdensome once the property is completed.

The other options refer to different types of financing that do not fit the context of repaying a construction loan. For instance, bridge loans are generally short-term loans that assist borrowers in transitioning between financing arrangements but are not specifically designed for repaying construction loans. Standby loans involve having a line of credit available for later use, and Alt-A loans are a category of mortgage loans that have less strict underwriting standards than prime loans but still do not directly pertain to the repayment of construction financing.