How rehab and construction draws work
On a hard money rehab or construction loan, the renovation budget is held in a draw reserve instead of being paid out at closing. As work is completed, you request a draw, the lender reviews the progress, and the funds are released.
Why lenders use draws
Draws match the money to the work. The purchase is funded at closing, and the rehab or build funds are released as the project moves forward. That keeps the loan in line with the property's value at every stage and keeps the project on track.
How it works with Prairie Stone Lending
- At closing: we fund the purchase and set up a draw reserve for your rehab or construction budget.
- Do the work: complete a stage of the project.
- Request a draw: submit the request from your online client portal.
- Review: we review the completed work.
- Funding: the draw is released, and your portal shows what's been drawn and what's left.
Tips for smooth draws
- Build a detailed scope of work: line items by trade make each draw easy to verify.
- Budget realistically: include a contingency, because surprises are common in older homes.
- Plan cash flow with your contractor: agree on what gets paid at each stage.
- Document progress: clear photos of finished work speed up review.
Your term sheet and loan documents spell out exactly how draws work on your loan.