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Ground-Up Construction Loan Draw Schedule Explained
By Jason Taken · Principal
How investor construction draws work — inspections, release timing, and interest on undrawn balance. Avoid GC idle time.
Construction draws release funds after third-party inspection at milestones — typically 8–12 draws on a 12-month build. Interest often accrues on the full loan commitment, including undrawn holdback.
Submit clean draw packages early. How to submit a scope of work · new construction loans.
Typical draw milestones — 12-month SFR build
| Draw # | Milestone | % of budget |
|---|---|---|
| 1 | Foundation / footings | 10–15% |
| 2 | Framing / roof dry-in | 20–25% |
| 3 | Plumbing / electrical rough | 15–20% |
| 4 | HVAC / insulation | 10% |
| 5 | Drywall | 10% |
| 6 | Cabinets / trim | 10% |
| 7 | Final MEP / fixtures | 10% |
| 8 | CO / punch list | 5–10% |
Each draw requires third-party inspection — submit invoices, lien waivers, and photos 48 hours before inspection date.
Common draw delays — and fixes
| Delay | Fix |
|---|---|
| Incomplete lien waivers | Collect from subs at each draw |
| Work ahead of schedule | Lender won’t fund uninspected work |
| GC idle between draws | Stagger subs; pre-order long-lead items |
| Change orders without approval | Submit CO to lender before work |
Jaken Finance Group construction: 8.99%–13.5% IO, up to 100% LTC qualified, 75% LTARV. How to submit SOW · new construction hub
Interest on undrawn balance — budget example
$420K commitment, 12-month build, 10.75% IO
| Month | Drawn | Undrawn | IO charge base (full commitment) |
|---|---|---|---|
| 1 | $63K | $357K | $420K → ~$3,763/mo |
| 6 | $252K | $168K | $420K → ~$3,763/mo |
| 12 | $420K | $0 | $420K → ~$3,763/mo |
You pay on full commitment even when undrawn — verify on term sheet from Jaken Finance Group.
GC coordination for smooth draws
- Submit draw request 5 days before needed wire
- Include signed lien waivers from all subs paid prior draw
- Schedule inspection before ordering next material batch
- Never get more than one draw ahead of inspected work
Spec home financing · SOW submission
Lien waiver chain — non-negotiable
Every draw package needs unconditional lien waivers from:
- General contractor
- Every subcontractor paid from prior draw
- Material suppliers above state threshold
Missing waivers delay draws 5–10 business days — you still pay IO on full commitment.
Change orders during construction
| CO size | Lender process |
|---|---|
| Under 5% of budget | Often approved in-house |
| 5%–15% | Revised budget + re-inspection |
| Over 15% | Full re-underwrite of LTARV |
Construction cost guide · Jaken Finance Group 8.99%–13.5% IO
Retainage — why the final draw is never 100%
Most construction lenders hold 5%–10% retainage until punch list completion and lien waiver clearance:
| Retainage % | On $420K budget | Release trigger |
|---|---|---|
| 5% | $21,000 | Final inspection + CO |
| 10% | $42,000 | Same + 30-day lien period |
Sponsors who model eight equal draws forget retainage — and run out of cash for landscaping, driveway, and final MEP when the lender will not fund draw 8 at 100%. Budget sponsor cash for retainage gap plus 2 weeks of GC overhead after CO.
Weather and force majeure — draw timing in cold climates
Chicago, DC, and Midwest builds lose 30–60 days to frost, concrete cure delays, and roofing temperature minimums:
| Season | Risk | Draw impact |
|---|---|---|
| Nov–Mar (cold) | Concrete/foundation delay | Draw 1–2 slip 3–6 weeks |
| Apr–May | Catch-up framing | Draw 2–3 compressed |
| Summer | On schedule | Normal cadence |
Extend your construction term sheet for one free extension if breaking ground after October 1 in the Midwest — IO on full commitment continues during weather delays whether or not the GC is on site. Spec home financing covers market selection; this section covers calendar risk on the same product.
Inspector selection — who signs off on each draw
Construction lenders use third-party inspectors independent of the GC:
| Inspector type | What they verify | Typical fee |
|---|---|---|
| Draw inspector | Percent complete vs budget line | $150–$350 per visit |
| Structural engineer (if flagged) | Foundation, framing | $500–$1,200 |
| MEP inspector (some lenders) | Rough-in before drywall | $300–$600 |
You cannot substitute your GC’s sign-off for the lender inspector — ordering drywall before rough-in inspection passes is the #1 draw rejection on investor builds. Schedule inspections 48 hours before you need the wire; same-day requests rarely fund.
Spec vs custom build — draw cadence differences
| Build type | Draw count | Lender comfort | Common delay |
|---|---|---|---|
| Spec (no buyer) | 8–12 | LTARV caps leverage | Market absorption at CO |
| Pre-sold custom | 6–10 | Higher LTC if contract in file | Buyer selection changes |
| Build-to-rent (BTR) | 10–14 | DSCR exit modeled | Lease-up after CO |
Spec builds often front-load framing and dry-in draws (40%–50% of budget by month 4) because lenders want the structure weathertight before releasing finish dollars. Custom builds with a signed contract may release finish draws faster — but change orders from the buyer still trigger re-inspection. Pair this guide with construction-to-DSCR refinance when your exit is hold, not sale.
Draw package checklist — what the lender expects each time
Every draw request should include:
- Signed draw request form with line-item completion percentages
- Invoices matching budget categories (not lump-sum GC invoice)
- Unconditional lien waivers from GC and all subs paid on prior draw
- Dated photos of completed work (geo-tagged preferred)
- Updated schedule showing next milestone date
Missing any item delays funding 5–10 business days — you pay IO on the full commitment while waiting. Submit packages through the channel your lender specifies; email attachments without a draw number often sit in queue behind complete files.
Soft costs in draw schedules — permits, fees, and interest reserve
Ground-up budgets split hard costs (labor and materials) from soft costs (permits, architect, engineering, loan fees). Lenders release soft costs on different schedules:
| Soft cost | Typical draw timing | Documentation |
|---|---|---|
| Building permit fees | Draw 1 or pre-close | Paid receipt |
| Architect progress billing | Draws 2–4 | Invoice + % complete |
| Interest reserve | Held by lender | Released monthly to pay IO |
| Contingency line | Last 5%–10% | Change order approval |
Interest reserve held in the loan commitment pays your monthly IO so you do not wire cash during build — verify whether your term sheet includes interest reserve or expects sponsor-funded IO from day one. Missing interest reserve on a 12-month build adds $35K–$45K in sponsor cash need beyond equity injection.
Ground-up construction draws — tie schedule to exit
Draw schedules are the operating rhythm of any ground-up investor build — spec, custom, or build-to-rent. Model retainage, weather delay, and inspector lead time before you sign a 12-month term sheet at 8.99%–13.5% IO. Your exit determines how tight the schedule must be: spec-to-sell needs CO aligned with absorption season; build-to-rent needs lease signed before the last retainage release so construction-to-DSCR can pay off the construction balance. New construction loans for investors covers program leverage; this guide covers the monthly mechanics that keep draws funding on time.