Did you find this out via a conversation with someone or by reviewing the loan documents?

BTW, you might go back and edit your post for the confusing language ("charging us principal on the full amount"). You aren't charged principal, you're charged interest on the principal.

There's nothing wrong with my language, weedyacres...that's why I was confused though because this method is not typical, like ncrealestateguy said. I've done a construction loan before, I've also researched a ton and I know how they *usually* work. We are actually being going to be paying PRINCIPAL on the full amount of the loan we're taking- land plus cost of construction before any draws occur. Then obviously after the draws begin we'll be paying interest on the draws. I guess the advantage is that we're paying a chunk of principal during construction instead of throwing only interest out the window. It was just super unusual to me and I wanted to see if anyone had heard of it. I tried to get the loan documents in advance and didn't see them until today at closing.

I think I am probably too late to be of any real help, but many companies do installment rather than interest only loans. While I agree it is not the industry standard for construction loans it is not unheard of either. One of the three banks we looked at did regular installment loans

Could it be because you're financing the land too? Or is that with another lender? In that case it would be considered more of a "normal" mortgage where you pay towards principle too.

In the 3 houses we've built, the land was always fully paid for before construction began and was never part of the loan.

Thanks bry911 and Christopher_H...it must be because we're refinancing the land with them (yes, same lender). The whole thing has been very unconventional dealing with 70 acres of farmland.

I'm with weedyacres, how do they charge you principle? Do you send them a periodic check?

SaltiDawg, yes I begin paying principal beginning April 1st on the full amount of the land and the anticipated construction cost. Way different than any way I've ever seen.

Let me attempt a rephrasing, and let me know if this is accurate:

You are only paying interest on the draws that you make plus the value of the land that you've refi-d into this.

You have to start repaying principal at some rate before the construction is complete. i.e., it's not an interest-only loan.

If this is correct, then this does sound odd. How much principal is paid each month, and does this go up as you draw more construction funds? I'm curious at the details as to how it's structured. A fully amortized land loan plus interest-only on draws?

All of the OP's answers will be located in their loan docs.