Short-Term Loans

Balloon loan

A loan with a lump sum payment, usually at the end of a loan period. The balloon loan may be paid as an interest-only loan for a period of time and then be paid off all at once. It may also be a partially amortized loan, in which case it's paid off through a series of amortized payments with a balloon payment at the end of the term.

Bridge loan (swing loan

A temporary (usually 90-day) loan that provides funds in addition to an existing loan until permanent financing can be obtained. Often used for buyers who haven't yet sold one property, but want to purchase a new one. Best used when the buyer's current home is already under contract.

Construction mortgage

Temporary financing for construction purposes. The developer submits plans for a proposed project, and the lender makes a loan based on the property appraisal value and the construction plans. The entire loan isn't given at once; disbursements are made at intervals as phases of construction are completed. Upon completion, the lender makes a final inspection, closes the construction loan, and converts the loan into permanent, long-term financing. Construction loans involve risk for the lender (they are essentially loaning on land, air, and a promise to build) and usually come with a higher rate