Draw Schedule
What is a Draw Schedule?
A draw schedule is a detailed timeline that outlines the disbursement of loan funds during a construction or renovation project. It aligns funding with specific milestones, ensuring that funds are released incrementally as work progresses. Draw schedules are critical for managing cash flow, maintaining accountability, and ensuring that projects stay on track.
How Draw Schedules Work
When a construction or renovation loan is approved, the borrower and lender agree on a draw schedule that specifies when funds will be disbursed. Here’s how the process typically works:
- Milestone-Based Disbursements: Funds are tied to specific project milestones, such as site preparation, framing, plumbing, or final inspection.
- Inspections: Before releasing funds, the lender may require a third-party inspection to verify that the work has been completed according to the agreed-upon plans.
- Retainage: Some lenders withhold a portion of each draw (e.g., 5–10%) as retainage until the project is complete to ensure all work is finished to satisfaction.
The borrower asks for each release with a draw request. For the full sequence, from underwriting through the final draw, see our step-by-step guide to the construction loan draw process.
Components of a Draw Schedule
A well-structured draw schedule typically includes:
- A list of construction phases or tasks (e.g., site preparation, foundation, roofing), often taken from a line-item budget or schedule of values.
- The dollar amount and percentage of the construction budget allocated to each phase.
- The estimated completion date for each milestone.
- Inspection requirements and criteria for fund release.
A draw schedule covers the work itself, mainly hard costs. Carrying costs such as interest, taxes and insurance aren’t part of the rehab budget, so plan to pay them separately.
Construction Draw Schedule Example
Here is a simplified construction loan draw schedule for a ground-up single-family home with a $300,000 construction budget. Each draw is released after an inspection confirms that the phase is complete.
| Draw | Phase completed | % of budget | Draw amount | Cumulative funded |
|---|---|---|---|---|
| 1 | Site work and foundation | 15% | $45,000 | $45,000 |
| 2 | Framing, roof, windows and exterior doors | 20% | $60,000 | $105,000 |
| 3 | Rough-ins: plumbing, electrical and HVAC | 20% | $60,000 | $165,000 |
| 4 | Insulation and drywall | 15% | $45,000 | $210,000 |
| 5 | Interior and exterior finishes | 20% | $60,000 | $270,000 |
| 6 | Final: punch list, final inspection and certificate of occupancy | 10% | $30,000 | $300,000 |
| Total | 100% | $300,000 |
Real percentages depend on the project’s budget. A home with high-end finishes weights the later draws more heavily, while a difficult site puts more into the first. Many lenders build the schedule from a line-item budget, so each draw pays for the specific line items completed rather than a fixed percentage, and simpler builds may combine phases into fewer draws.
Fix and Flip Draw Schedule Example
A renovation usually has fewer, larger draws than a ground-up build. Here is a three-draw schedule for a fix and flip with a $60,000 rehab budget:
| Draw | Work completed | % of budget | Draw amount |
|---|---|---|---|
| 1 | Demolition, roof, and plumbing, electrical and HVAC rough-ins | 40% | $24,000 |
| 2 | Insulation, drywall, cabinets and flooring | 35% | $21,000 |
| 3 | Paint, fixtures, appliances and punch list | 25% | $15,000 |
| Total | 100% | $60,000 |
On many renovation loans, each draw is based on the percent complete of each line item rather than fixed phase percentages. See a line-by-line draw request example, or read how draw schedules work on a fix and flip.
Benefits of a Draw Schedule
Draw schedules provide several advantages for borrowers and lenders alike:
- Cash Flow Management: Ensures that funds are available when needed while avoiding unnecessary upfront disbursements.
- Accountability: Helps monitor project progress and ensures that funds are used appropriately for each phase of construction.
- Risk Mitigation: Protects lenders by reducing the likelihood of unfinished projects or misuse of funds.
Challenges of Draw Schedules
While beneficial, draw schedules can also present challenges:
- Delays in inspections or approvals can slow down fund disbursements and stall progress.
- Disagreements between borrowers and lenders about milestone completion can cause friction.
- Unexpected project changes or cost overruns may require adjustments to the schedule.
Draw Schedules with LYNK Mortgage
On LYNK Mortgage fix and flip loans and new construction loans, you or your contractor submit a scope of work or draw schedule during underwriting that identifies the cost of each task. If you finance construction or renovation costs, the construction budget is held back at closing and released through draws. Draws are inspection-based and released by phase, such as foundation, framing, rough-in and finishes, after each completed phase is verified. Most loans are structured with two to four draw requests; complex projects may have up to six, which is generally the maximum. To see how requests are submitted, read how to submit a draw request with LYNK Mortgage.