Construction Loans & Draw Schedules in Florida: How Payments Work During a Build
Most custom homes in Florida aren’t paid for in one check. They’re financed with a construction loan that releases money in stages as the work progresses. Understanding how that loan works, and how the draw schedule connects to your contractor’s progress, helps you avoid payment delays, liens and budget surprises.
This guide explains how construction loans and draw schedules work in Florida, what lenders require, and how to keep payments moving smoothly from foundation to final inspection.
How Construction Loans Work
A construction loan is a short-term loan used to pay for building a home. Instead of receiving the full amount at closing, the lender releases funds in installments called draws. Each draw is tied to a stage of construction and is typically released only after an inspector confirms the work is complete.
During construction, borrowers usually pay interest only on the amount drawn so far. When the home is finished, the loan is either paid off or converted to a standard mortgage.
For an overview of total project costs, see our breakdown of the realistic cost to build in Florida.
Types of Construction Loans
Construction-to-Permanent Loans
This loan covers construction and then converts into a regular mortgage once the home is complete. You go through one approval and one closing, which reduces fees and paperwork. It’s the most common option for owners building a primary residence.
Stand-Alone Construction Loans
A stand-alone loan covers only the construction period. When the home is finished, you take out a separate mortgage to pay it off. This can offer flexibility, but it means two closings and the risk that mortgage terms change before construction ends.
Renovation Loans
For major remodels and additions, renovation loans finance the work based on the home’s expected value after improvements. They also use draws, so the same principles in this article apply.
What Lenders Require Before Closing
Plans, Specs and Detailed Budget
Lenders want to see complete construction drawings, specifications and a line-item budget. The budget becomes the basis for the draw schedule, so vague allowances or missing items can create problems later. Good pre-construction budget planning makes approval faster and protects you from shortfalls.
Licensed General Contractor and Signed Contract
Most lenders approve the builder as well as the borrower. They typically ask for the contractor’s license, insurance, references and a signed construction contract with a fixed price or clear cost structure. A contractor with experience working with lenders can save weeks during approval.
How a Draw Schedule Works
Typical Draw Milestones
A draw schedule divides the loan into stages. A typical schedule for a custom home might look like this:
| Draw | Milestone |
|---|---|
| 1 | Permits, site work and foundation |
| 2 | Framing or block walls and roof dry-in |
| 3 | Rough plumbing, electrical and HVAC |
| 4 | Windows, doors, insulation and drywall |
| 5 | Interior finishes, cabinets and fixtures |
| 6 | Final inspection and Certificate of Occupancy |
The exact stages and percentages vary by lender and project.
Draw Inspections
Before each draw, the lender usually sends an inspector to confirm the completed work. The inspector verifies progress, not code compliance; that’s the job of the building department. Delays in scheduling draw inspections can slow payments to the contractor, so it helps to request them early.
Lien Waivers
In Florida, subcontractors and suppliers can place liens on your property if they aren’t paid. To protect you and the lender, each draw is typically accompanied by lien waivers or releases from the contractor and key subs and suppliers, confirming they’ve been paid for work covered by previous draws.
Retainage and the Final Draw
Many contracts hold back a portion of each payment, called retainage, until the project is complete. Retainage gives the owner leverage to make sure the punch list is finished. The final draw is usually released after the Certificate of Occupancy, a final inspection and completion of the final walkthrough and punch list (потрібно вставити посилання зі статті 6).
Florida-Specific Rules: Notice of Commencement and Construction Lien Law
Florida’s Construction Lien Law gives contractors, subcontractors and suppliers the right to file liens for unpaid work. Two documents matter most for owners:
- Notice of Commencement. Recorded with the county before work starts on most permitted projects. It identifies the owner, contractor, lender and property, and it must be posted at the job site.
- Notice to Owner. Sent by subcontractors and suppliers to let you know they’re working on your project and have lien rights.
Keep every Notice to Owner you receive, and make sure those parties provide releases before you approve payments. This is one of the simplest ways to prevent paying twice for the same work.
Common Payment Problems and How to Avoid Them
- Budget gaps. If the budget leaves out items, the loan runs short before completion. Review hidden construction expenses before you finalize numbers.
- Change orders without funding. Upgrades during construction must be paid from your own funds or approved by the lender.
- Slow draw inspections. Schedule them as soon as a milestone is reached.
- Missing lien releases. Lenders may hold funds until paperwork is complete.
- Schedule delays. Interest accrues while the loan is open, so a longer build costs more. See our guide to a realistic build timeline in Miami.
How Your Contractor Affects Loan Approval and Draws
Your contractor’s experience directly affects how smoothly financing goes. A well-prepared contractor provides a detailed budget, realistic schedule, organized lien releases and documentation for each draw. Strong construction management keeps the work, paperwork and payments aligned.
If you’re still deciding whether to build or buy, our analysis of building vs buying in Florida compares the financial side of both options.
FAQ
How do construction loan draws work? The lender releases money in stages after an inspector confirms each milestone is complete. The contractor is paid from these draws.
Do I pay interest during construction? Usually yes, but often only on the amount drawn so far, not the full loan.
What is retainage in construction? A portion of each payment held back until the project is complete, typically to ensure the punch list is finished.
What is a Notice of Commencement in Florida? A document recorded with the county before construction starts that identifies the owner, contractor and lender, and protects the owner under Florida lien law.
Can I use a construction loan for a renovation or addition? Yes. Renovation loans and some construction loans can fund remodels and home additions (потрібно вставити посилання зі статті 3).
Planning to Finance Your Build?
CoreExec works with owners and lenders on ground-up construction across South Florida, providing budgets, schedules and draw documentation lenders expect. Contact us to start planning your project.