Line of credit

Since this type of contract is many times used as a 'line of credit' in that when the contractor purchases materials, pays sub contractors for work and pays himself for oversight, the moneys for these services are drawn from the building account. A construction home loan account is set up by the lender, allowing the building costs to be withdrawn. During the time of project progression, only interest is paid on on these contracts. It is important that an accurate assessment of building time is factored into the amount and time allowed for the funding agreement.