What is the purpose of a construction mortgage?

A construction mortgage is specifically designed to provide funding for the costs associated with constructing a new building. This type of mortgage is unique because it typically covers the expenses involved in the building phase, which may include materials, labor, permits, and any other costs that arise during the construction process.

Unlike a traditional mortgage that might be used to purchase an existing property, a construction mortgage is structured to release funds in stages as different phases of construction are completed. This helps ensure that the funds are used appropriately for the intended purpose—building the new structure.

The other options highlight different financing needs that do not pertain directly to the actual construction of a new building. For instance, funding renovations on an existing property or financing the purchase of vacant land deals with established real estate investments rather than new construction projects. A line of credit for property investments relates to funding already acquired properties or investments rather than the direct costs associated with constructing a new one.