The Quick Read: Finish the work in the approved scope, pay for it, and submit a complete package: a draw request, an updated budget, invoices, photos, and lien waivers. The lender then verifies the work and pays against what it confirmed. Draw rules are written into each loan agreement, so the terms you sign decide how smooth the process is.
- Rehab money is held back at closing and released in stages, usually as reimbursement for finished work.
- Lien waivers and stale title evidence are the most common reasons a draw stalls.
- A passed draw inspection confirms the work exists. It is not a permit or code sign-off.
- Plan to front early costs with your own working capital.
- Keep every invoice and proof of payment. They matter again at the refinance.
Most investors learn the draw process after closing, when the contractor wants a check and the lender wants paperwork. This article walks through the mechanics in order, so the package is built before the first request goes in. Hard money terms vary by lender, property, and experience, and nothing here is a commitment to lend.
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.
What Is a Rehab Draw, Exactly?
A rehab draw is a staged release of renovation funds held by the lender. At closing, the purchase portion funds. The rehab budget sits in a holdback and is paid out as work is completed and verified.
That is why the money is not in your account after closing. On a typical fix-and-flip file, leverage is set against project cost and capped against after-repair value. Leverage on the project varies by lender, property, and experience, and the top tier is reserved for investors with documented completed projects.
There is no federal rulebook for private-lender draws. The closest benchmark is bank supervision. The OCC Comptroller’s Handbook on commercial real estate lending tells bank examiners to look for disbursement controls that confirm draws match verified improvements, accurate inspection reports, and a budget that stays in balance. It does not bind private lenders. It does show the logic every draw package is built to satisfy.
How Do You Set Up Draws Before Closing?
Draws go smoothly when the scope of work is built to become the draw schedule. Break the scope into stages, give each line item a budget, and match the stages to how your contractor expects to be paid.
Three setup habits matter most:
- Line-item detail. Vague lines like “interior work” are hard to verify. “Rough electrical, 100% of unit” is easy to inspect.
- Contractor alignment. Match the contractor’s payment schedule to the lender’s draw schedule before closing. A contractor who expects 50% up front on a deal where the lender reimburses after inspection creates a gap you fund yourself.
- Waiver language in the contract. Put the lien waiver requirement into the contractor and subcontractor agreements. In one BiggerPockets thread, an investor’s subcontractor refused to sign a waiver at final draw because the title company raised the requirement late. Building it in up front avoids that fight.
Files tend to run cleanest when the draw schedule and the contractor agreement are written together, not separately.
What Does the Draw Cycle Look Like Step by Step?
The cycle repeats for every draw. Practices differ by lender, but the order is consistent.
1. Finish the phase. Complete the work in the approved stage, such as demo, rough-in, drywall, finishes, or final.
2. Pay for it. Most draws reimburse work you have already paid for. One investor describes it on BiggerPockets this way: funds are released on a schedule tied to completed work, so you typically cover the first phase and are reimbursed after inspection.
3. Submit the package. Send the request with every supporting document (see the next section).
4. Inspection. A third-party inspector, or your own photos and video, verifies the work.
5. Release. The lender pays against what it confirmed. Many lenders credit partial completion, so half-built work earns about half of that line item.
6. Repeat, then final draw. The last release typically needs final lien waivers, a final inspection, and permit closeout.
How long a release takes depends mostly on how complete the package is. Treat any published turnaround as a lender-specific figure, not a standard.
What Goes in a Draw Package?
A complete package leaves the reviewer nothing to chase. Typical contents:
| Item | Why the lender wants it | Common mistake |
|---|---|---|
| Draw request | Starts the review | Wrong line items |
| Updated budget | Shows percent complete by line | Not updated since closing |
| Invoices and receipts | Proves cost | Invoices exceed visible progress |
| Proof of payment | Shows you paid | Missing for subs |
| Approved change orders | Keeps scope matched | Unsigned changes |
| Dated progress photos | Shows the work exists | Undated or unlabeled |
| Lien waivers | Protects the lender’s lien position | Missing sub-level waivers |
Primior Group’s explainer on draw controls adds that bank-style packages often include a change-order log and an updated construction schedule. Hard money lenders may ask for less. Plan for more anyway.
Why Do Lien Waivers Cause the Most Trouble?
Lien waivers are where draws stall most often. A draw-software vendor, Rabbet, says missing or incomplete waivers, especially from subcontractors, are the top cause of draw rejections. That is a vendor claim without published data behind it, but it matches what files show.
Know the pieces:
- Conditional vs. unconditional. A lender may require conditional waivers for the current draw and unconditional waivers for the previous one.
- State forms. Waiver forms can be set by statute. A generic form should not be assumed effective in every state.
- Title date-down. The title company confirms no new liens have appeared since the last draw. A clean prior draw does not prove the current period is clean.
Picture a developer who submits a draw without subcontractor waivers. The title update reveals a supplier lien from unpaid invoices, and the lender freezes the draw. An educator site, GoBuildYourHouse, describes that case, a $38,000 supplier lien. It is an illustration, not a statistic. The fix is simple: collect waivers from every payee before submitting, not after the lender asks.
What Does the Inspector Check, and What Don’t They?
The inspector confirms the work exists and matches the approved scope and budget. That is not the same as a code or permit sign-off. A draw can pass inspection while a permit is still open, and a final draw can still wait on permit closeout.
What helps at the site:
- Clear access to every area in the request.
- Photos that are dated and labeled by line item.
- Work finished, not staged. Materials delivered or stored on site are often not drawable until installed.
- A scope that matches the budget. Work outside the approved scope can be denied.
Inspection cadence differs. Some lenders inspect every draw. Others inspect once and accept photos for the rest. Get the cadence in writing, because a promised inspection that never happens stalls a draw as surely as a missing waiver.
Why Do Draws Get Delayed, Reduced, or Denied?
Most stalls trace to a short list of causes. The fix is usually documentation, not argument.
| Cause | What it looks like | Fix |
|---|---|---|
| Missing lien waivers | Request pended | Collect from every payee first |
| Work outside scope | Line denied | Get a written change order approved |
| Permit pending | Final draw held | Schedule permit closeout early |
| Title issue or lien | Draw frozen | Clear it, then request a date-down |
| Invoices exceed progress | Partial release | Match billing to finished work |
| Front-loaded costs | Reduced draw | Re-sequence the budget |
Partial credit is normal. If a line is 60% done, expect about 60% of that line. Ask the lender to recheck once the rest is finished rather than disputing the first number.
How Much Cash Do You Need Between Draws?
Plan for a float. Because draws reimburse finished work, you need working capital beyond your down payment. One investor on BiggerPockets suggests carrying the first 20% to 30% of the rehab yourself. That is one investor’s opinion, not a rule, but it shows the scale of the gap.
Run the sizing this way. Take the cost of the first phase and add the next phase’s cost, since you will usually pay it before the first draw lands. That sum is your minimum float. Then add a cushion for overruns. Draw count matters too: most lenders limit draws, commonly three to five. Fewer draws mean fewer inspection fees but larger outlays between releases. Many small draws cost more in fees than a few larger ones.
Also check how interest accrues. Some lenders charge interest on the full balance from closing. Others charge only on funds disbursed. The loan agreement decides, and it changes your real carry cost.
How Should You Handle Contractors and Change Orders?
Pay on milestones, not on percent complete. That is the advice of one investor on BiggerPockets, and it lines up with how lenders verify work. A small deposit followed by milestone payments keeps your outlay close to what the lender will reimburse.
For change orders, get the lender’s approval in writing before the work starts. An unsigned change order is a red flag in the review. Long-lead items are worth ordering early, but remember that stored materials often are not drawable until installed.
What Happens When a Draw Is Late?
Work through it in order:
1. Ask what is missing. Get the exact deficiency in writing.
2. Fix the document gap. Most delays are waivers, photos, or a stale title update.
3. Confirm the inspection status. Find out whether it was scheduled, completed, or never ordered.
4. Escalate with a record. Send your original submission, dates, and the loan agreement’s draw terms to the loan servicer or your lender contact.
5. Tell your contractor early. A late draw is a scheduling problem as much as a cash problem.
Remote and out-of-state investors feel this most. Photos, video walkthroughs, and a local project manager who can meet the inspector keep the file moving when you are not on site.
Where Do the General Rules Break?
Several structures change the picture:
- Advance draws. Advances exist but generally go to experienced investors.
- Pay-through-title. Some structures route draws through a title company that updates title at each release and can pay subs directly. Others wire you. Title involvement can add steps to each draw release, such as title date-downs.
- Retainage. Retainage is a bank construction convention. Do not assume a hard money loan has it.
- Inspection once vs. every draw. Lenders range widely, so the loan agreement is the only reliable guide.
What Should You Confirm in the Loan Agreement?
Before signing, confirm these points, because there is no industry-standard draw schedule:
- Number of draws allowed.
- Inspection cadence, who inspects, and the fee structure.
- Whether interest accrues on the full balance or on disbursed funds.
- Documents required per draw and for the final draw.
- Whether title involvement or date-downs apply.
- How partial completion is credited.
- Who to contact when a draw is late.
For the program side, hard money through Lendmire’s network typically runs 6 to 18 months, interest-only, with a 620 credit minimum and added conditions below 660. Fix-and-flip leverage runs up to 93% of project cost at 5 or more completed projects, 90% at 2 or more, and 85% with fewer than 2, with every tier capped at 75% of after-repair value. All of it varies by lender, property, and experience.
How Do Draw Records Help the Exit?
Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. A DSCR lender does not read your draw schedule. It reads invoices, proof of payment, the appraisal, and the ownership clock. Keep clean draw records for the refinance. The complete DSCR loans guide explains how that stage works. Also watch the bridge term: a note that matures before seasoning runs out is a common structural mistake.
Key Terms Defined
Draw: a staged release of renovation funds from the lender’s holdback.
Holdback: rehab money the lender keeps in escrow until work is verified.
Scope of work (SOW): the written list of renovation tasks that becomes the draw budget.
Lien waiver: a signed statement from a contractor or supplier that they were paid and give up lien rights for that amount.
Title date-down: a title update confirming no new liens since the last draw.
Change order: a written, approved change to the scope or budget.
Frequently Asked Questions
Is the rehab money released at closing?
No. The purchase portion funds at closing, and the renovation budget sits in a holdback. It is released in stages as work is completed and verified.
Do I have to pay the contractor before I get reimbursed?
Usually, yes. Draws normally reimburse finished, paid work, so plan to front the early phases. Some experienced investors can get advance draws, but that is the exception.
Does a passed draw inspection mean my permits are closed?
No. The inspector confirms the work exists and matches the scope. Permit and code sign-off are separate, and an open permit can hold the final draw.
What is a common reason a draw is held up?
Missing lien waivers, especially from subcontractors. Stale title evidence, work outside scope, and invoices that exceed visible progress follow close behind.
How many draws will I get?
It depends on the loan agreement. Lenders commonly limit draws to a handful, and more draws usually mean more inspection fees. Confirm the count and fee structure before signing.
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.
For a wider look at how staged funding works on a flip, see Lendmire’s piece Can Hard Money Pay for Fix and Flip Rehab Through Draws?.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
Lendmire — NMLS# 2371349 — is a DSCR and non-QM mortgage brokerage with investor loan programs in 41 markets, including Washington, D.C. DSCR eligibility is commonly reviewed by the lender around property-level rent rather than personal income documentation, subject to lender guidelines, and the brokerage helps arrange financing for LLC-owned portfolios beyond conventional financed-property limits. Recognized by Scotsman Guide as a Top Mortgage Workplace in 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your investment property. No commitment required.
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. OCC Comptroller’s Handbook, Commercial Real Estate Lending
2. BiggerPockets: Sub refuses to sign lien waiver
3. BiggerPockets: Draws or Lump Sums
4. Primior Group: Construction Loan Draw Process Controls
5. Rabbet: Construction Draw Package Standard
6. GoBuildYourHouse: Mechanics Liens, Lien Waivers and Draws
7. BiggerPockets: Paying for a GC for a flip
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Get a Hard Money Loan for a First Flip With No Track Record · Hard Money Loan Qualification Rules for a First-Time Investor · Can You Refinance Out of Hard Money After an Overspent Rehab?
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
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.