Construction holdbacks

Construction holdbacks are a portion of the construction loan that is retained by the lender. This is a common practice in construction projects.

The holdback amount is typically released to the borrower incrementally as construction progresses.

The lender earns interest on the full loan amount, including the portion that is held back. So even though the borrower does not have access to that holdback portion of the funds, the lender is still collecting interest on the entire loan balance.

This arrangement provides the lenders with proper security throughout while also earning interest on the full loan amount rather than just the disbursed funds.