The Quick Read: On a hard money rehab loan, the renovation money is held back at closing and released in stages as verified work gets finished, so the stage a project sits in decides what you request, what proof you bring, and how much cash you front. Each draw follows the same loop: finish a milestone, pay the contractor, submit a request, pass a verification, and get reimbursed. Terms vary by lender, property, and experience, and nothing here is a commitment to lend.
- The loan has two parts: acquisition funds paid at closing and a rehab holdback released in draws.
- Most structures reimburse after the work is done, so plan to pay the first stage yourself.
- Lien waivers and a title update usually travel with each draw request.
- With several rehabs running, fund the project closest to its exit first.
- Draw pace has to fit the loan term, which on this program runs 6 to 18 months, interest-only.
What Is a Rehab Draw?
A draw is a scheduled release of renovation money from a holdback the lender controls. The lender does not hand over the whole rehab budget at closing. It releases pieces as work is completed and inspected.
The reasoning is simple. The lender is lending against what the property will be worth after repairs. If you spent the budget elsewhere, the lender would hold a half-finished house worth far less than the loan. Releasing money against finished work keeps the budget tied to the building.
Yieldstack’s explainer on fix-and-flip draw schedules describes the same flow: funds are held back, then released as verified work triggers each draw. So the loan is effectively two pieces. One piece pays for the property at closing. The other sits in holdback until the work earns it.
A draw is not a revolving credit line and not a second loan. You cannot pull from it whenever you want. Money comes out only when verified work justifies it.
How Much of the Project Does the Loan Cover?
On most files, the loan covers a high percentage of project cost, not a purchase price percentage. Across the network, leverage tiers by experience. Treat these as program ceilings that vary by lender, property, and experience:
- Fix-and-flip: up to 93% of project cost at 5 or more completed projects, 90% of project cost at 2 or more, and 85% of project cost with fewer than 2. Every tier is capped at 75% of after-repair value (ARV), which is the projected value once the work is done.
- Bridge purchase with no rehab: up to 80% of the purchase price.
- Refinance, cash-out or rate-and-term: up to 65% of value.
- Rehab budget: up to 100% of the rehab budget can fund in draws against completed work.
That last line causes the most confusion. There is no true 100% purchase program. When someone says 100% rehab financing, they mean the renovation budget can be funded through draws, not that you put nothing in. You still bring the down payment on acquisition, closing costs, and the cash to float early work.
Underwriting stays asset-based. The lender looks at the property, the plan, and the exit. A 620 credit score is the typical minimum, with additional conditions below 660, and first-time investors generally land in the lower leverage tiers. Loans run up to $5,000,000, with larger balances by exception, on non-owner-occupied 1-4 unit properties. Ground-up construction goes to 10 units.
The Draw Process, Step by Step
Draw mechanics come from loan documents and lender policy, not from a statute. What follows is typical practice, and your lender’s rules govern.
1. Underwriting and budget. You submit the purchase contract and a scope of work. An appraiser establishes the as-is value and the ARV. The scope should be broken into stages that become the draw schedule.
2. Closing. Acquisition funds go to the seller. The rehab holdback is set aside. Ask early whether the lender wants any rehab cash in hand at closing.
3. Float the first stage. Reimbursement is the common structure, so you usually pay for early work first. Many investors plan to front a slice of the budget for materials and the contractor’s mobilization. Advance draws are the exception and tend to go to experienced borrowers.
4. Finish the milestone. The work has to be complete for that line item, not merely started.
5. Submit the request. The package lists the finished line items from your approved scope. It usually includes invoices, photos, and lien waivers.
6. Verification. A third-party inspector visits, or you submit dated photos or video. Some lenders do both at different points.
7. Review and funding. The lender approves an amount matched to verified progress. If half of a line item is done, expect about half of that line.
8. Final draw and retainage. The last draw follows the punch list and final walkthrough. Some structures hold a slice back as retainage until the very end, a point Yieldstack’s draw-schedule guide also covers.
Inspections mainly confirm that the claimed work exists. They are not a quality review. Visibly bad work may get flagged, but do not count on an inspector to catch what your own punch list should.
Liens, Waivers, and Title: The Paperwork Behind Each Draw
Lenders protect the collateral from contractor liens, so lien paperwork rides with draws. A lien waiver is a signed document confirming that a contractor, sub, or supplier was paid and gives up lien rights for that amount, as Mastt’s lien waiver guide explains.
Waivers come in two forms. GoBuildYourHouse notes that a conditional waiver is collected before payment, while an unconditional waiver is collected after the funds clear. Expect your lender to ask for waivers down the chain, not just from your general contractor. Paying the GC does not protect you if the GC skips the plumber.
Title plays a part too. The ALTA Title and Escrow Claims Guide explains that mechanic’s lien coverage on construction loans is tied to draws, and it applies only to work by parties actually paid as part of the insured draw request. A Schwabe law-firm commentary adds that lenders should disburse through a title company, and where lien coverage is unavailable they should pay the GC directly.
Practically, that means three things. Your lender may require a title update at each draw. It may pay the contractor directly. And it may slow or reduce a draw when paperwork is missing. Keep clear records of every payment.
Stage by Stage: What You Request and What Stalls
The table below is a model for planning, not a lender schedule. Your approved scope sets the real milestones.
| Stage | What you request | Proof expected | Common stall |
|---|---|---|---|
| Just closed | Usually nothing yet | Permits, signed contract | Permits not pulled |
| Demo and structural | First draw | Photos, waivers | Hidden damage, scope change |
| Rough-ins | Draw for plumbing, electrical | Inspection, permit sign-off | Failed rough inspection |
| Drywall and mechanicals | Largest draw, often | Photos, invoices | Material delays |
| Finishes | Later draw | Photos of installed items | Items ordered, not installed |
| Punch list and final | Final draw, retainage | Walkthrough, certificate | Open permits |
Just closed. On reimbursement structures, the lender pays nothing at this point. You fund permits, the contractor deposit, and early materials. This is where thin liquidity hurts most.
Demo and structural. This is usually the first request. Bring clear before-and-after photos tied to the exact line items in your scope.
Rough-ins and mechanicals. These stages tend to be capital-intensive. Verification often depends on a municipal sign-off, so a failed inspection holds up the lender’s draw too.
Finishes. Installed means installed. Boxes of flooring in the garage rarely count.
Punch list and final. Closing out permits matters here. Open permits can hold the final draw and the retainage, and they complicate the exit later.
Some properties are bought partly renovated. In that case the appraiser sets the as-is value and the holdback typically covers only the remaining work. Finished work from the prior owner earns no draw.
Running Several Rehabs at Once
With multiple projects, the draw cycle on each property runs on its own clock, but your cash is shared. Fund the project closest to its exit first, because finishing it frees capital for the others. Ring-fence each budget, including its contingency. Borrowing from one property’s reserve to rescue another is how two projects end up stalled.
Here is a modeled four-property example. The stages and ranking are assumptions for illustration, not market data.
| Property | Stage | Next draw | Cash fronted | Maturity |
|---|---|---|---|---|
| A | Just closed | First draw | Rising | Latest |
| B | Rough-ins done | Mechanicals | Moderate | Middle |
| C | Drywall in | Finishes | Large | Middle |
| D | Punch list | Final, retainage | Small | Soonest |
Property D gets attention first. Closing it out releases the final draw and moves it toward sale or refinance. Property C needs the most cash right now, so a draw request there is worth sequencing carefully. Property A looks quiet but will start drawing down your liquidity once demo begins.
Keep a one-page tracker with these columns: property, current stage, next draw, cash fronted, maturity date, and documents outstanding. Update it every time you submit a request. A stalled project shows up there before it shows up in your bank balance.
Many investors in this position keep a liquidity cushion that covers the next stage on every active property, not just the one in front of them. Your own cushion depends on contractor terms and how your lender handles reimbursement.
Fewer Draws or More Draws?
The number of draws is a tradeoff between your cash and the lender’s inspection cost. Ask how many draws the loan allows and how the lender verifies each one.
| Approach | Upside | Downside |
|---|---|---|
| Fewer, larger draws | Fewer inspections and fees | More cash fronted between releases |
| More, smaller draws | Less cash at risk per stage | More paperwork and inspection fees |
| Photo-based verification | Less scheduling friction | May suit simpler scopes and experienced borrowers |
| Third-party inspection | Stronger verification | Adds scheduling and per-visit cost |
Per-inspection and wire fees are common, so ask for the fee schedule up front. Interest treatment on the holdback also differs. Some lenders charge interest only on funds disbursed, and others charge on the full loan amount, so confirm how yours works before comparing offers.
A lender with a more affordable structure on paper can still cost you if draws pile up in its queue. Ask how it handles draw turnaround, because contractors do not wait politely.
When a Draw Goes Sideways
Most problems come from a mismatch between what you claimed and what the site shows. These are the common ones.
| Problem | Typical fix |
|---|---|
| Stage claimed but not finished | Finish it, then resubmit |
| Scope change or change order | Get lender approval before the work |
| Budget line overrun | Request reallocation, or fund the gap yourself |
| Missing waiver | Collect it, including from subs and suppliers |
| Open permit | Close it out before the final request |
| Partial approval | Fund the difference and request the remainder |
A draw can be reduced or delayed when the claimed progress does not match the site. Treat a partial approval as information, not an insult. Tighten the next request.
Scope changes deserve special care. A hidden problem behind a wall can blow up one budget line while another line sits unused. Ask your lender how reallocations work before you need one.
Some private lenders skip the holdback and fund the whole loan at closing. That can look convenient. It is also riskier for the lender, and it usually shows up in the pricing and the leverage limits.
Draw Pace, the Maturity Clock, and the Exit
Draw pace and the loan term are tied together. This program runs 6 to 18 months, interest-only, with no prepayment penalty, again varying by lender, property, and experience. Every delayed draw eats into that clock, and the final draw cannot come before the work is done.
If your projects have staggered maturities, put the soonest on top of your tracker. Do not wait until the last month to find out a permit is still open. For more on what happens when the term runs out, see Lendmire’s comparison of a DSCR cash-out and a bridge loan when hard money matures.
Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. A DSCR loan compares rent to the full monthly housing payment, and 1.00 is where many select programs start. Programs below 1.00 are available through select lenders in the network, with leverage and terms adjusted. Cash-out refinance on a rental tops out around 75% LTV across most of the network, with about 6 months of seasoning as the common expectation. The refinance needs a finished, rentable property, so finishing the rehab on schedule feeds directly into it. The complete DSCR loans guide walks through how that exit works. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
One caution. A DSCR above 1.00 does not mean positive cash flow, because repairs, vacancy, and management sit outside the calculation.
A clean draw history helps this handoff. Closed permits, collected waivers, and documented costs all make the refinance or sale file easier to build.
Key Terms Defined
Draw: A scheduled release of rehab money from the holdback after verified work.
Holdback: The part of the loan set aside at closing and released only through draws.
ARV (after-repair value): The property’s projected value once the planned work is finished.
Loan-to-cost: The loan amount as a share of total project cost, used for leverage on fix-and-flip files.
Scope of work: The line-item plan and budget that becomes your draw schedule.
Lien waiver: A signed document confirming payment and giving up lien rights for that amount.
Retainage: A slice of funds held back until final completion.
Frequently Asked Questions
How much cash do I need out of pocket on a rehab bridge?
Enough for the down payment, closing costs, and the early work you pay before the first reimbursement. With leverage up to 93% of project cost for the most experienced tier and lower for others, the rest comes from you. The cash to float stages is separate and depends on your lender and contractor terms. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Do I need an in-person inspection for every draw?
Not always. Some lenders send a third-party inspector at each milestone. Others accept dated photos or video for simpler scopes or experienced borrowers. Ask which method applies before you sign.
When should I submit a draw request?
After the milestone is finished and the contractor is paid, with your line items, photos, and waivers ready. Submitting early invites a reduced or delayed draw. A request that matches your approved scope line by line tends to go smoothest.
Can a draw be only partly approved?
Yes. If verified progress falls short of the claim, the lender can pay only the portion it can confirm. Finish the gap, document it, and request the remainder on the next draw.
What happens to the final holdback?
It releases after the punch list, final walkthrough, and any retainage conditions in your loan documents are met. Open permits and missing waivers are the usual reasons it sits. Close those out first.
Next Step
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. Lendmire is a broker that arranges financing through select lenders in its wholesale network, across 41 markets including Washington, D.C. Every file is underwritten individually, and nothing here is a commitment to lend.
For current guidelines and terms, see Lendmire’s hard money loan programs page.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage focused on investor financing, arranging DSCR loans in 40 states plus Washington, D.C. — 41 markets total. Qualification is based on the property’s income rather than personal income documentation, subject to lender guidelines, making it a fit for LLC-held rentals and scaling portfolios. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Yieldstack – Fix and flip draw schedules
3. GoBuildYourHouse – Mechanics’ liens, lien waivers, and draws
4. ALTA Title and Escrow Claims Guide, Ch. 10
5. Schwabe – Mechanic’s liens in construction financing
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Does a Portfolio DSCR Loan Save Money Over One Loan per Rental? · How to Present a College Town Rental Portfolio to a DSCR Lender · Can an Airbnb Turned Long-Term Rental Join a Portfolio DSCR Loan?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.