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Borrower5 min readDraft — client review
How draws work on a rehab loan
Rehab funds are released against completed work — here's how the mechanics work.
On fix & flip and new construction loans, rehab funds aren't handed to you at closing. They're released as draws — payments against completed portions of the scope of work.
Why draws?
Draws protect both sides. They keep the loan sized to the work actually completed (which protects investor capital), and they keep interest low for the borrower — because interest accrues only on the drawn balance, not on funds still sitting undrawn.
DrawsReduce carrying cost, protect capital
How the mechanics work
- You complete a portion of the scope of work.
- You submit a draw request against specific line items.
- For smaller items, we typically accept photo evidence. For larger items or milestone draws on new construction, we may require an inspection.
- Once verified, we release the draw — usually within a few business days.
- Interest starts accruing on the newly-drawn portion.
Interest on drawn balance only
If the loan is approved at $221,000 but only $150,000 has been drawn, interest is only calculated on $150,000. This is a real cost saver on long projects.
Have more questions?
Talk to a specialist — we'll walk through anything the guide didn't cover.