What Is a Draw Schedule on a Construction Loan?

Q: What happens if the build runs over budget?

Tell us before you spend it, not after. A construction loan is sized to a specific budget and schedule, so an overrun mid-build has to be re-underwritten against remaining contingency and the finished value. The earlier that conversation happens the more options exist. Coming to a lender after the money is spent removes most of them.

Q: How does a construction loan draw work?

Funds release in stages tied to completed, inspected milestones. You pay interest only on the amount drawn so far, and you typically fund each stage before reimbursement.

Q: How many draws are in a construction loan?

It varies, but draws usually map to major milestones such as foundation, framing, roof, mechanicals, and finish, often a handful across the project.

Q: Do you pay interest on the full construction loan?

No. You pay interest only on funds that have been drawn, which keeps early-stage carrying costs lower.

The short answer

A draw schedule releases construction funds in stages as work is completed. Learn how draws and inspections work and how to keep them on time.

A draw schedule is the agreed plan for releasing construction or rehab funds in stages as the work gets done, rather than all at once. Each stage is a "draw," and you only pay interest on the money that has actually been released.

How does a draw work?

The budget is divided into milestones, foundation, framing, roof, mechanicals, finish. As each milestone is completed and inspected, the lender reimburses that portion of the budget. You fund the work first, then get reimbursed, which is why you keep some working capital on hand.

Why lenders use draws

Releasing money in stages protects everyone: funds track real progress, so the loan stays aligned with the value being built and there is no large unspent balance sitting idle.

How to keep draws on time

Match your budget to the draw schedule before you start.
Document completed work and request inspections promptly.
Keep enough working capital to fund each stage ahead of reimbursement.

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Frequently asked

How much of the build will a construction loan fund?

Up to 70% LTV or 85% LTC on our ground-up program, with loan amounts up to $5M. LTC is the one that usually binds, because it measures against total cost rather than finished value. Terms run 12 to 24 months from 10.00%, and funds release per the build schedule rather than in a lump sum at closing.

How long does a draw take to fund?

Draws are reimbursed as work is completed and inspected, not in advance. That timing is what surprises first-time builders: you or your contractor carry the cost of each phase before it is reimbursed. Build that float into your budget and your contractor agreement. A slow draw is far more often a paperwork or inspection gap than a lender decision.

What happens if the build runs over budget?

Tell us before you spend it, not after. A construction loan is sized to a specific budget and schedule, so an overrun mid-build has to be re-underwritten against remaining contingency and the finished value. The earlier that conversation happens the more options exist. Coming to a lender after the money is spent removes most of them.

How does a construction loan draw work?

Funds release in stages tied to completed, inspected milestones. You pay interest only on the amount drawn so far, and you typically fund each stage before reimbursement.

How many draws are in a construction loan?

It varies, but draws usually map to major milestones such as foundation, framing, roof, mechanicals, and finish, often a handful across the project.

Do you pay interest on the full construction loan?

No. You pay interest only on funds that have been drawn, which keeps early-stage carrying costs lower.

Rates, leverage, and timelines mentioned in this guide are typical figures, subject to underwriting and market conditions. Not a commitment to lend. Nothing here is legal, tax, or investment advice.

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