The Quick Read: A draw is a reimbursement. You finish a phase of work, the lender verifies it, and then the lender wires money out of the rehab holdback. The clock runs on inspection scheduling, paperwork, and the lender’s own review, so it varies by lender and no single number applies.
- Rehab money is held back at closing and released in stages against completed work.
- You usually pay for each phase first, so you need working cash beyond your down payment.
- Every draw follows the same order: request, documents, inspection, approval, wire.
- Delays come from unfinished work, missing lien releases, inspector scheduling, and wire problems.
- Any change to wire instructions should be verified by phone before money moves.
How a Draw Works, Start to Finish
A hard money loan on a rehab splits into two buckets. One bucket buys the property. The other bucket is the rehab budget, which stays with the lender until work is done.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
On most files in our wholesale network, the first bucket funds at closing. The second comes out in draws. Fix-and-flip programs typically fund 85% to 93% of project cost, depending on how many projects you have completed, and cap the loan at 75% of after-repair value. Up to 100% of the rehab budget can be released through draws against completed work. That last figure is a rehab-budget number, not a purchase loan-to-value. Terms vary by lender, property, and experience.
The draw schedule is set at closing. Your scope of work is split into phases, and the lender usually reviews it against the projected after-repair value. Many lenders let you choose how many draws you want, within their limits.
More draws mean smaller cash gaps. They also mean more inspection fees, so many investors settle on a middle number.
The Timeline at a Glance
The table below lays out the stages in order. Lenders do not publish one national clock, so it shows who acts at each stage and what stretches it.
| Stage | Who acts | What stalls it |
|---|---|---|
| Work completed | You and your contractor | Unfinished line items |
| Draw request | You | Missing or vague line items |
| Documents | You and contractor | Lien releases, invoices, photos |
| Inspection ordered | Lender | Inspector availability |
| Site visit and report | Inspector | Locked site, work not visible |
| Review and approval | Lender | Partial credit, disputes |
| Wire sent | Lender | Instruction checks, bank cutoffs |
| Funds received | Your bank | Weekends, holidays |
The loan documents set the real schedule, not a regulator. Read that section before you sign.
Before You Request a Draw
Request only when a phase is finished and visible. A request for work that is 80% done often earns a partial payment or a return trip.
Here is a readiness checklist and the delay each item prevents:
- Line items match the budget. The lender pays against the approved scope, so a mismatch invites questions.
- Photos of completed work. Some lenders accept photos or a livestreamed walkthrough in place of a visit.
- Invoices and lien releases. Some lenders require signed releases from contractors. Collect them even when yours does not.
- Site access. A locked door or no power can cost you a second visit.
- Loan in good standing. Lenders generally release draws only when the loan is current and the project is on budget.
What Happens at the Inspection
The inspector checks that the work you claim exists and matches the line items. This is not a city code inspection. Municipal inspections are separate, though a failed one can stall the work and therefore the next draw.
Formats vary across the lenders we place files with. Some send a third-party inspector, and the fee is often passed to you. Others accept photos or a livestream. Ask about fees up front, because they add up across a multi-draw project.
An inspection has three outcomes:
1. Pass. The lender approves the full request.
2. Partial credit. The lender pays for the portion it can see. Policies differ. Some pay pro rata on half-built items, and others want an item complete and installed before paying anything.
3. Fail. You fix the issue, request a re-inspection, and the clock restarts.
Partial credit is the policy to check before closing. If your lender pays only on finished items, split the budget into smaller line items so progress gets paid.
Approval and the Wire
After the report comes back, the lender reviews it against the request and approves a payment amount. Then it sends the wire. Timing here depends on bank cutoffs, so a wire sent late in the day or before a weekend may not land until the next business day.
Know who receives the money before the first draw. Most lenders reimburse the borrower, so you pay the contractor. A few pay a contractor or an escrow agent directly. That choice should be in your loan documents.
Wires are also where fraud shows up. The National Association of Realtors advises verifying wire instructions through an independently obtained phone number and never sending wire instructions by email. If a wire goes wrong, contact your bank immediately to request a recall and file an FBI complaint. Apply the same rule if a contractor suddenly sends new account details. Consumer agencies such as the Consumer Financial Protection Bureau and the D.C. Department of Insurance, Securities and Banking publish similar warnings about real estate wire scams.
A Worked Example: Three Draws
Say you buy a duplex at the 90% of project cost tier and plan a three-draw rehab. This is a modeled scenario, not market data.
Draw 1: demolition and rough work. You pay your crew from your own cash. When the phase is finished, you submit photos, invoices, and lien releases. The inspector confirms the work. The lender reviews, approves, and wires. During this whole stretch, your cash is tied up.
Draw 2: mechanicals and drywall. This is the draw where partial credit shows up. Say plumbing is complete but electrical is half-finished. A pro-rata lender pays the finished portion. A complete-and-installed lender pays the plumbing line only if you broke it out separately.
Draw 3: finishes and final. The last draw usually needs a final inspection. If any portion of the rehab budget is retained until completion, it comes out here.
Each draw repeats the same chain, so delays compound. Two slow draws can add up to a month of extra holding cost. That matters because the loan is interest-only and runs 6 to 18 months, and a late rehab can push you into maturity. Plan your contractor payment dates backward from when you expect funds, not from when you submit.
Why Draws Get Delayed (and What Fixes Each)
| Cause | Symptom | Fix |
|---|---|---|
| Work unfinished | Partial credit | Request only at phase end |
| Missing lien releases | Review stalls | Collect with each invoice |
| Inspector backlog | No site visit | Ask about scheduling at closing |
| Vague line items | Questions from lender | Match the approved budget |
| Wire instruction check | Funds held | Confirm by phone ahead of time |
| Failed city inspection | Work halts | Pass municipal checks first |
Experienced investors rarely lose time on the wire itself. They lose it before the request, when documents are incomplete or work is not visible.
Change Orders and Failed Inspections
A change order alters the scope after the schedule is set. Lenders typically want it approved in writing before the work happens. If you change scope without approval, the inspector may count the original line items and nothing else.
A failed inspection works the same way. You correct the issue, send new photos or request a return visit, and the lender restarts its review. Ask in advance how a re-inspection is ordered and who pays for it.
Where the General Rule Breaks
Several features vary enough to change your cash plan:
- Up-front draws. Some lenders release a first draw at closing, but most expect you to fund the first phase yourself.
- Interest on undrawn funds. Some programs charge interest only on funds drawn, and others charge on the full balance from closing. This changes your holding cost.
- Reimbursement share. Some borrowers are reimbursed less than the full cost of each phase and carry that equity through the project.
- Contractor cash needs. Small contractors may ask for money up front, so many investors negotiate a modest deposit and tie the rest to milestones.
- Experience tiers. The top leverage tier is reserved for investors with several completed projects. First-time investors qualify at lower tiers, with a minimum credit score of about 620 and additional conditions below 660. This varies by lender, property, and experience.
There is no true 100% purchase program. Lenders hold back rehab money, and that is why the process exists.
The Final Draw and Closeout
The final inspection confirms the project is complete. Lenders may release any retained amount at that point. After that, you sell or refinance. Many investors refinance out of hard money into long-term DSCR investor loans once the property is stabilized, and Lendmire brokers that path.
Choosing a Lender With Draws in Mind
The draw process matters as much as the headline terms on a rehab loan. Compare how each lender inspects, how it treats partial work, whether it charges interest on undrawn funds, and how it wires.
For background on how the long-term side works, read the complete DSCR loans guide. Tax treatment varies; consult a qualified professional.
Key Terms Defined
Holdback: The part of the loan kept by the lender and released only as rehab work is completed.
Draw: One release of holdback money after an inspector verifies a finished phase.
Scope of work: The written list of repairs, split into line items with budgets.
Lien release: A signed document from a contractor confirming payment and giving up a claim against the property.
After-repair value: The estimated value of the property once the rehab is finished.
Frequently Asked Questions
How long does a draw take from request to wire?
It varies by lender. Lenders using photos or livestream verification usually move differently from those that schedule a site visit. Ask each lender for its sequence and its inspector’s scheduling process.
Do I pay my contractor before the lender pays me?
Usually yes. Most draws are reimbursements for work already done, so plan working cash beyond your down payment. A few lenders advance a first draw, but that is less common.
What happens if an inspection fails?
You fix the issue and request a re-inspection. The lender may pay for work that passed and hold the rest. Partial-credit rules differ, so confirm yours before closing.
Who receives the wire?
Most often you do, and you then pay the contractor. Some lenders pay the contractor or an escrow agent directly. Your loan documents should say which.
What if my wire instructions change?
Verify by phone using a number you found independently, never one from the email that announced the change. If a wire goes to the wrong account, call your bank right away to request a recall.
If You’re Planning a Rehab
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 arranging financing through select lenders in its wholesale network, across 41 markets, including Washington, D.C. Terms are subject to lender guidelines, and nothing here is a commitment to lend.
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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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. National Association of Realtors: Wire Fraud
2. Consumer Financial Protection Bureau: Mortgage Scams One-Pager
3. D.C. Department of Insurance, Securities and Banking: Beware Real Estate Wire Transfer Scams
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Get Hard Money to Buy at Auction With an Inherited Tenant? · Keeping Seller Financing vs Refinancing Into a Hard Money Loan · How to Refinance a Hard Money Flip Into a DSCR Loan Early
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.