| Decision | When a builder needs another source of interest payments |
| Bring to the review | Current balance, available reserve, remaining draws and maturity |
Find the first interest bill the remaining reserve cannot pay in full. Start with the latest loan statement, add the draws still needed to finish and run interest through a realistic payoff date. Then compare that date with maturity. A builder can have enough cash to pay interest next month and still need an extension before the home sells.
Which number on the statement matters?
Request the available interest reserve after pending charges. A loan statement may also show undisbursed hard costs, retainage and contingency. Each has its own purpose. Confirm what is available specifically for interest and the date through which interest has already been paid. Use the reserve and contingency guide if your budget groups these amounts together.
A final draw can move the cash deadline forward
Assume a builder has $30,000 left in a cash-funded interest reserve, a $1.8 million loan balance and three months until an expected spec-home sale. Use 8% annual simple interest with equal months for illustration. With a flat balance, interest would total $36,000. A quick estimate would put the shortfall at $6,000.
The builder still needs a $300,000 construction draw at the end of month one. That changes the next two bills. Assume the entire draw funds, the reserve pays only interest, and no principal is repaid before the sale.
| Billing month | Reserve and cash position |
|---|---|
| 1 · $12,000 interest on $1.8 million | $18,000 left in reserve |
| 2 · $14,000 interest on $2.1 million | $4,000 left in reserve |
| 3 · $14,000 interest on $2.1 million | $10,000 must come from another source |
If the sale closes a month later, the shortfall rises to $24,000 under the same assumptions. Check the actual billing dates, daily balance and rate. The figures exclude extension charges, taxes, insurance and any interest charged on financed interest.
Put the shortfall and maturity on the same calendar
Mark the next interest due date, the first partially uncovered payment, the contractual maturity date and any deadline to request an extension. Add the remaining inspection, certificate of occupancy if required, buyer financing and expected sale closing. For a rental exit, use the expected refinance funding date and any required lease-up milestones.
Ask which obligations must be paid while a request is under review. A proposed extension or refinance has its own conditions. If the note matures before the planned closing, even a fully funded interest reserve leaves the principal payoff to address.
Planning a build or a construction refinance? Discuss the project and its financing deadline with Stonehaven. Start with the location, remaining work and the month the loan matures. Detailed loan statements can wait for a secure review.
What would support a revised financing plan?
Prepare the current cost to complete, available loan funds by budget line, remaining sponsor cash and a dated exit plan. Explain the specific delay. An inspection scheduled two weeks late creates a different decision from an unsold house with no buyer under contract. Show a second case with a later payoff and state who would pay each uncovered bill.
The FDIC construction and land development examination procedures ask bank examiners to consider project feasibility, timing and guarantor capacity when reviewing reserve increases or extensions. As a mortgage broker, Stonehaven can review the assumptions and discuss financing options. Any modification to the existing loan requires the appropriate parties’ agreement.
How should I budget for the next build?
Keep the projected and actual draw dates from this job. When pricing the next project, use those dates to size a new interest reserve from the draw schedule. A delayed closing late in construction can cost more per month than the same delay when only the land advance is outstanding.