Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 2

The term that refers to a short-term loan arrangement specifically for property development is a construction loan. This type of financing is designed to cover the costs associated with building or renovating a property. Borrowers typically use construction loans to pay for materials, labor, and other expenses incurred during the construction process.

Construction loans are usually structured as short-term loans, which means they are intended to last only for the duration of the construction project. After the project is completed, the borrower may need to secure a new mortgage to pay off the construction loan, transitioning into a long-term financing arrangement.

In contrast, fixed-rate mortgages are long-term loans with a fixed interest rate, balloon mortgages have a short-term structure but require a large payment at the end, and equity loans involve borrowing against the equity in an existing property rather than funding new construction.