What is the term for a loan that pays off a construction loan and provides financing for a buyer?

The correct term for a loan that pays off a construction loan and provides financing for a buyer is a takeout loan. This type of loan is specifically designed to provide long-term financing after the construction period has ended. It effectively replaces the short-term construction loan that was initially used to fund the building process.

Takeout loans are essential in real estate finance because they allow buyers to transition from higher-interest construction loans to a more stable mortgage, often at a lower rate, which is more manageable in the long term. This helps facilitate the purchase or ongoing financing of a newly constructed property, making it a vital step in the financing process for builders and buyers alike.

In contrast, other types of loans mentioned serve different purposes. A bridge loan typically provides temporary financing during transitions, such as between selling one property and buying another. A home equity loan allows homeowners to borrow against the equity in their current home, while refinancing involves replacing an existing loan with a new one under different terms, generally for the purpose of getting a better interest rate or adjusting the loan amount. Each of these loans serves its distinct function and does not fulfill the specific role of a takeout loan in the financing of construction.