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Progress Draw Mortgage

A progress draw mortgage releases funds in stages during construction, with inspections verifying completion before each advance.

Progress Draw Mortgage

September 30, 2025


What is a Progress Draw Mortgage?

A progress draw mortgage is a financing arrangement commonly used in new construction where the lender advances funds in stages as the building project progresses. Inspections are conducted at each stage to confirm completion before the next draw is released.

Why a Progress Draw Mortgage Matters in Real Estate

Progress draw mortgages matter in real estate because they provide builders and homeowners with access to funds throughout construction without needing the full loan upfront. Lenders reduce risk by releasing funds only after work is verified. Borrowers must carefully plan cash flow to match construction timelines.

Example of a Progress Draw Mortgage in Action

A custom home builder secures a $600,000 progress draw mortgage. The lender advances 20% when the foundation is complete, 30% at framing, 30% at lock-up, and the remaining 20% at completion after final inspection.

Key Takeaways

  • Funds advanced in stages during construction.
  • Inspections required before each draw.
  • Reduces lender risk and ensures work completion.
  • Requires detailed planning of cash flow.
  • Common in custom builds and large renovations.

Related Terms

Additional Terms

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Mortgagee in Possession

A mortgagee in possession is a lender who takes control of a property after borrower default, but before foreclosure or power of sale. The lender. more

Lease Surrender Agreement

A lease surrender agreement is a negotiated contract between a landlord and tenant that ends a lease before its scheduled expiration. Terms may. more

Green Infrastructure

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Escrow Holdback

An escrow holdback is a portion of funds withheld at closing and held in escrow until specific conditions are met, such as completion of repairs,. more

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