DRW

Draw Schedule Planner

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How to use the Draw Schedule Planner

1
Enter the rehab holdback
The part of your loan set aside for the renovation. It's on the term sheet.
2
Add the rate and payoff month
Interest on each draw runs from the day it funds until you repay the loan.
3
Set the first milestone
Most lenders release the first draw after demolition and rough-in are inspected.
4
Fill in the rest
The shares should add up to 100%. Lenders often hold back the last 10–20% until the final inspection.
5
Add the draw fee
Inspection and wire fees are charged every time a draw is released.

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Most rehab loans don't hand you the renovation money at closing. The lender holds it back and releases it in draws as an inspector confirms each phase of work. This tool lays out your draws, shows the interest each one costs, and tells you how much cash you'll need to get the job started.

Worked example

A flipper has a $60,000 rehab holdback at 11% and plans to repay the loan in month six. The lender releases four draws: 25% in month one, 25% in month two, 30% in month three and the last 20% in month four. Each draw costs a $250 inspection fee.

Interest on the draws comes to about $1,950. If the lender charged interest on the full holdback from day one, it would be $3,300, so paying only on funds drawn saves about $1,350. The four draw fees add $1,000.

The average balance works out to 59% of the holdback, which you can enter in the Hard Money Loan Cost tool. Because draws usually reimburse work already done, the flipper needs about $15,000 in cash to pay for the first phase.

The formula

Draw amount       = Holdback × Draw share
Interest on draw  = Draw amount × Rate × (Payoff month − Draw month) ÷ 12
Full-holdback int = Holdback × Rate × Payoff month ÷ 12
Average balance   = Σ (Draw amount × Months outstanding) ÷ (Holdback × Payoff month)
Draw fees         = Fee per draw × Number of draws

Common mistakes

Assuming draws pay in advance. Most lenders reimburse completed work. You or your contractor must front the cost of each phase.
Not reading how interest is charged. Some lenders charge interest on the full loan, including undrawn rehab funds. That's sometimes called Dutch interest. Ask before you sign.
Too many small draws. Every draw adds an inspection fee and a few days' wait. Fewer, larger milestones are often cheaper and faster.
Ignoring inspection timing. Inspections can take several days to schedule. Build that into your contractor's payment schedule.

Questions people ask

What's a typical draw schedule? Many lenders use four to six draws tied to milestones such as demolition, rough-in, drywall, cabinets and final. Your lender will often send its own draw request form.

What if I need money before the first draw? Some lenders will release an initial draw for materials or deposits. Otherwise, plan to fund the first phase yourself. The Cash to Close tool includes rehab you'll front.

What to do next