The original lender is done. The frame is up. Draws are frozen. Interest still accrues. Mid-construction refinance is the facility Jaken Finance Group uses when a ground-up or heavy rehab loan cannot finish the work, and as-is value today plus as-completed value still support a new stack.
This is not a brand-new land loan. It is not “one more draw” on a maxed facility. It pays off or replaces the stuck loan, funds remaining work in inspected draws, and gets the project to certificate of occupancy, sale, or a DSCR hold.
Qualified files price at 8.99%–13.5% interest-only. Close targets 10–14 business days when title, remaining scope, and the exit are already in the package. Apply through newbuild. If you still do not know whether this is a stalled house, unpaid streets, or a bad deal, start at new construction loans for investors.
A short video on cost overruns and contractor failure lives on the mid-construction refinance watch page and the companion article. Houston appraisal-light notes stay there. Remaining-work math, GC walk-offs, and unpaid-street files are below.
When a mid-construction refinance is the right product
Use this facility when vertical work has started and the current loan cannot finish it.
Typical files:
- The original lender hit its loan-to-cost cap. Remaining drywall, MEP, or site work has no unused draw.
- The GC walked. A new contractor will finish, but the first lender will not fund a replacement.
- Change orders and material spikes blew the budget. As-completed comps still clear the new all-in.
- Permit or weather slip burned the interest reserve. The building is real. Liquidity is not.
- A heavy rehab was labeled a flip, then became a rebuild. The six-month term does not match the calendar.
Do not send unplatted acreage here. That is vacant land. Do not send a recorded plat with unfinished streets and no house. That is horizontal costs and bonding. Do not send a first shovel on a clean lot. That is ground-up construction or spec / build-to-rent.
Two values, not one story
Mid-build underwriting runs on two numbers at once.
| Number | What it measures | Why it binds |
|---|---|---|
| As-is value | Land plus work in place today | We will not ignore a half-built frame, and we will not pretend it is finished |
| As-completed value | What the same product sells or appraises for at CO | Total new debt must sit at or under 75% of this number |
| Remaining cost | Line-item bid to finish, plus contingency | Draws only fund work that is still ahead |
| Payoff | Current construction balance, accrued interest, valid liens | The new loan has to clear title |
We fund the lower of remaining cost (after payoff) and 75% of as-completed value. If 75% of as-completed is $540,000 and you need $610,000 to pay off and finish, the file is as-completed-bound. Sponsor cash fills the gap. “Up to 100% LTC on a new spec” does not apply to a stalled job whose finished value cannot carry the new stack.
Interest-only accrues on money that has been drawn. An idle frame in January still costs carry. Put that in the reserve. Do not model a six-month flip reserve on a job that needs nine more months to CO.
Worked example: cost overrun on a spec that still appraises
Illustrative. Your comps replace every line.
| Line | Amount |
|---|---|
| Original land plus vertical budget | $580,000 |
| Original construction loan | $520,000 |
| Outstanding payoff today | $475,000 |
| Remaining work after overruns | $185,000 |
| New all-in to finish (payoff + remaining) | $660,000 |
| As-completed comps, same product | $875,000 |
| 75% of as-completed | $656,000 |
The new facility can sit near $656,000, not $660,000. LTC on the original budget is irrelevant. As-completed value binds. Sponsor equity is about $4,000 of gap plus interest reserve and 10%–15% contingency on the $185,000 remaining bid, not on the original $580,000.
If as-completed comps are only $720,000, 75% is $540,000. That does not clear a $475,000 payoff plus $185,000 of work. The file is a pass unless remaining scope shrinks, a unit presells, or the sponsor posts a large check. Mid-construction refinance does not erase a bad ARV.
Exit at CO is a sale, or DSCR at 70%–75% LTV on the finished value. Seventy-five percent of $875,000 is $656,000. The construction balance and the takeout are almost the same size. There is little cash-out at CO. Pre-lease or presale is how the balance actually drops.
Worked example: GC walked, liens on title
The parlor floor is framed. The original GC recorded a claim. A new GC will finish for $160,000. Payoff on the first construction loan is $290,000. Recorded claims and retainage fights add $42,000. As-is support on land plus work in place is about $310,000. As-completed two-unit comps are $640,000.
Payoff plus liens plus remaining work is $492,000. Seventy-five percent of $640,000 is $480,000. The file is as-completed-bound by about $12,000, plus reserve. We will not fund until:
- A payoff letter exists for the first lender.
- Lien claims are paid, bonded around, or subordinated in writing.
- The new GC is licensed, insured, and has a bid that matches the remaining photos.
- Date-stamped photos show the last completed trade, not a mood board.
A walk-off without a replacement contractor is not a refinance. It is a distressed asset. We pass those until a GC is real.
Recorded plat, unpaid streets — different product
Sponsors often send a “mid-construction” package that is actually eight recorded lots with binder down and no lot release. The house loan never started. The city will not let a builder pull a permit. The original land lender is done.
That file is horizontal remaining work, not a house mid-build. Performance bonds, lot-release rules, and street draws live on subdivision horizontal costs and bonding. Phase pricing lives on subdivision development financing.
We will tell you the product is wrong in the first week, instead of treating unfinished curb as a house ARV. We will not copy the bond tables from the horizontal guide. Send the civil remaining-work bid, the city bond estimate, and the release checklist. If a house is already 60% complete on a released lot, come back here.
Mid-construction refinance vs. a draw extension vs. second position
| Situation | Typical move |
|---|---|
| Original lender will still fund remaining draws on schedule | Stay put. Fix the GC and the budget. |
| Lender maxed loan-to-cost. Work remains. Title is clean. | Mid-construction refinance into a new inspected facility. |
| First lender will stay in first. You only need a slice of remaining cost. | Second-position bridge on qualified files, still capped by as-completed value. |
| Contractor replaced mid-job | New budget, new GC package, then refinance or stay. |
| Sponsor has no liquidity and as-completed value does not clear payoff plus remaining work | Pass. This is not a zero-cash rescue. |
| Streets unpaid, lots not released | Horizontal facility. Not a house mid-build. |
Asking the first lender for “one more draw” is cheaper when they will do it. Refinance costs a new close. Use refinance when they will not, or when the GC and the remaining scope have changed enough that the old draw schedule is fiction.
Interest still accrues on an idle frame
A $475,000 outstanding balance at 11% interest-only is about $4,350 per month. Two months of a frozen draw schedule is about $8,700 that never shows up in the GC bid. Winter, a lien fight, and a replacement contractor can add four months. Budget that carry in the new reserve.
Roofing in November on an open frame is how a nine-month remainder becomes fourteen. Pour or dry-in on a real calendar, not on hope. Chicago and other winter markets already teach this on the city construction pages. The mid-build point is simpler. Frozen draws do not freeze interest.
What the package must show
Send facts, not panic.
- Full address and percent complete, named by trade: foundation, framing, dry-in, MEP, drywall.
- Date-stamped photos of the last completed work. A week-old framing photo does not prove dry-in.
- Original budget versus revised budget to completion, with 10%–15% contingency on remaining hard cost.
- As-is value support: prior appraisal, inspector report, or a tight comp set for work in place. Not a Zillow estimate.
- As-completed comps for the same product, not a custom from a different corridor.
- Current loan payoff, rate, maturity, and unused draws if any.
- GC status: who is on site, insurance, license, and a bid that matches the photos.
- Lien search, waivers, and change orders.
- Exit: list at CO, presale, or DSCR at 70%–75% LTV with a rent roll that needs a legal CO.
Files with a licensed GC, clean or solvable title, and a credible as-completed path move. Files with “GC TBD” and a text-thread budget do not.
What we pass
We pass owner-occupied houses. We pass jobs with no contractor and no remaining-scope bid. We pass as-completed comps from a different product. We pass a request to ignore recorded mechanic’s liens. We pass 100% of a blown budget when 75% of as-completed value is lower. We pass unfinished plats dressed up as house mid-builds. We pass a six-month term on a job that needs a winter and a new permit.
Passing early is cheaper than funding a frame that cannot reach CO.
How draws work after the refinance
The new loan is still construction. It is not a lump-sum cash-out.
Draws follow inspection: remaining structure, MEP, drywall, finish, then CO. We do not front-load more than a sensible share of remaining cost before the next visible trade is in place. Third-party inspection funds in 48–72 hours after a clean report on typical files. Plan days, not hours, between inspection and the sub getting paid.
Retainage exists so punch-list items get finished. If you fight retainage on a stalled job, expect a harder conversation. The last lender already learned that lesson.
Change orders need paper. The whole point of this product is that the first budget failed. The second budget should not fail the same way.
Exit at certificate of occupancy
Three honest exits:
- Sale. Model about 8% selling costs plus local transfer stamps. A thin spread after carry is still a sale file. Dual-exit math survives a slow listing.
- DSCR hold. Permanent debt on qualified files is 5.75%–10.5% at 1.0+ DSCR and 70%–75% LTV on as-completed value. Do not model 85% LTV takeout on this product.
- Hybrid. Presell or pre-lease one door so the construction balance drops at CO.
If only the sale works after a 10% haircut to as-completed value, you have a spec. If neither works, you do not have a refinance. You have a lot and a frame you should not have started.
Chicago, DC, and other permit calendars
Jurisdiction still matters mid-build. A Chicago DOB inspection hold, a DC Historic Preservation facade fight, or a county stop-work order is a calendar cost, not a footnote. Use the local construction guides when the permit office is the remaining risk: new construction loans Chicago, new construction loans Washington DC, and the state spec pillars from new construction loans for investors.
Fee tables live on those spec guides. The question here is whether the remaining permit path is short enough for the new term.
Houston and other market notes
In some markets, including Houston, select files can move on collateral and remaining scope with lighter appraisal or credit packaging. That is still underwriting. As-is and as-completed value must support the advance. Flood, tax, and lien status still matter. The short version and the video live on the companion article. Do not treat “Houston” as a nationwide no-appraisal promise.
Related construction products
- New construction loans for investors — pick spec, land, plat, or stalled vertical
- Ground-up construction with limited experience
- Spec home and build-to-rent
- Subdivision horizontal costs and bonding
- Vacant land loans
- Bridge loans
- DSCR loans
- Guide to construction loans
Apply with an honest remaining-work sentence
The fastest mid-build files say the collateral in one line. “Vertical 60% complete, GC lien, remaining drywall.” “Frame dry, original lender maxed, new GC bid in hand.” “Eight lots recorded, streets unpaid” — and then they go to the horizontal page instead.
New construction application · Submit scenario · Pre-qualify · (833) 264-7776
Rates, terms and conditions offered only to qualified borrowers and are subject to change without notice. Closing times are in business days and commence upon receipt of required diligence. All loans are subject to full underwriting. Jaken Finance Group only finances non-owner occupied investment properties.