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Refinance Construction Debt After Project Completion
The construction loan has done its job. Blue Fox Capital Corporation arranges and places the financing that pays it off, for completed and nearly completed investment property in most states.
- Refinance maturing construction debt
- DSCR, commercial or bridge takeout
- Most states, business-purpose only
On select programs, subject to lender approval. Not all applicants will qualify.
A construction loan is short-term money with a maturity date, and the project it funded now needs a different kind of financing: a long-term loan on a finished, income-producing property, or a bridge loan that carries the property through lease-up or sale. That refinance is the takeout. Blue Fox Capital Corporation arranges and places takeout financing for 1–4 unit rentals, small and large multifamily, mixed-use and commercial projects in most states. Availability depends on the program, the property type and the state, and we confirm it for your deal before anything is submitted. Business-purpose loans only.
Takeout Refinance vs. Construction-to-Permanent
Two things get called a takeout, and they are not the same transaction.
- A takeout refinance pays off an existing construction loan with a new loan, usually from a different program or lender, after the project is complete or nearly complete. The new loan is underwritten on the finished property: its value, its rent or its business plan. This page is about that refinance.
- A single-close construction-to-permanent loan is set up before construction starts. One loan funds the build and converts to permanent financing at completion under terms agreed at the beginning. If you are still planning the build, start with Construction & Fix-and-Flip Loans.
Most investors arrive at the takeout because the construction loan had no permanent phase, because the permanent phase did not fit the finished property, or because the lender that funded the build does not make long-term loans.
Where Your Project Is Determines the Takeout
- Complete and leased. Certificate of occupancy issued, tenants in place. The property is a candidate for permanent financing sized on actual rent.
- Complete, lease-up underway. Finished but partly vacant. Options include a bridge loan that retires the construction debt while leasing finishes, select rental programs that use the appraiser’s market rent, and no-ratio DSCR programs for 1–4 unit and small multifamily property.
- Nearly complete. Punch list open, final inspections or the certificate of occupancy pending. Permanent lenders generally wait for completion, so the conversation is about completion financing, a short extension, or a bridge loan that funds the remaining work and the payoff together.
- Build-to-sell. The exit is a sale, not a hold. If the construction loan matures before the sale closes, a bridge loan can carry the property through the listing period.
Takeout Paths by Property Type
- 1–4 unit rentals and small multifamily: a DSCR rental loan qualified on the finished property’s rent, or a no-ratio DSCR loan if it is not leased yet. Select programs use the new appraised value without a long seasoning period.
- 5+ unit multifamily and mixed-use: a multifamily permanent loan or commercial mortgage sized on the stabilized rent roll, with a commercial bridge loan first if the building is still leasing.
- Retail, office, industrial and special-purpose: a commercial mortgage once leases are signed, or a bridge loan during lease-up.
- A building your own business will occupy: see Owner-Occupied Commercial Loans, including SBA paths that can refinance construction debt on owner-user property.
What the Takeout Lender Reviews
- Completion. Final inspections, certificate of occupancy where required, open permits and any remaining work. Unfinished items usually have to be completed or escrowed.
- Value versus cost. An as-completed appraisal compared with the final budget and actual cost. How a program treats a recent completion, and whether it uses appraised value or cost basis, varies and matters.
- Income. Signed leases, the rent roll, deposits and rent collection history for leased units; the lease-up plan and the appraiser’s market rent for vacant ones.
- The existing debt. Construction loan payoff statement, maturity date, extension options and any mechanics’ liens or unpaid contractor balances that have to be cleared at closing.
- The sponsor. Credit, liquidity and reserves after closing, prior projects, and the entity that holds title.
- Insurance and taxes. Conversion from builder’s risk to permanent property insurance, and the property tax reassessment that follows new construction.
- Title. A clean title policy for the new lender, which means lien releases from the general contractor and subcontractors.
Documents to Prepare
- Construction loan statement, payoff letter and maturity date
- Certificate of occupancy or final inspection reports, and the permit status
- Final budget versus actual cost, with lien releases from the contractor and major subs
- Leases, rent roll and deposit records, or the leasing plan and marketing status
- Plans, specifications and the as-completed appraisal if one exists
- Permanent insurance quote or binder and the current tax bill or assessment
- Entity documents, organizational chart and identification for each guarantor
- Bank or brokerage statements showing reserves and funds to close
- A schedule of other real estate owned, with balances and income
Timing
Start the takeout before the certificate of occupancy, not after the maturity notice. A takeout involves a new appraisal, title work, insurance conversion and underwriting, and lenders will not promise a closing date. Extension fees and default interest on the construction loan are expensive, so the plan should include a fallback: a short extension, a bridge loan, or a smaller permanent loan with cash to close. If you are unsure which applies, send the scenario early and we will tell you what the file needs.
California Projects
California investors and developers can also read our California construction takeout planning guide, which walks through completion readiness, occupancy and the DSCR versus commercial decision in more detail.
How It Works
- Scenario review. Send the address, project type, completion status, construction loan balance and maturity, and the leasing status or sale plan.
- Path selection. We tell you whether the property is a permanent-loan candidate today, a bridge-first scenario, or a completion-financing conversation.
- Term sheet. Structure in writing, subject to lender approval. A term sheet is not an approval.
- Diligence. Appraisal, title and lien releases, leases, insurance conversion and entity documents.
- Close and pay off. The construction loan is paid through escrow and the new loan funds.
Construction Takeout FAQ
What is a construction takeout loan?
A loan that pays off an existing construction loan once the project is complete or nearly complete. It can be a long-term rental or commercial loan on the finished property, or a bridge loan that carries the property through lease-up or sale.
Can I refinance a construction loan before the project is finished?
Permanent lenders generally require completion and a certificate of occupancy. Before that point the options are usually an extension, completion financing or a bridge loan that funds the remaining work and the payoff together.
Do I need tenants in place?
For a standard rental or commercial permanent loan, usually yes, or at least enough leasing to support the payment. For vacant or partly leased property, bridge programs and no-ratio DSCR programs on 1–4 unit and small multifamily property may fit, with tighter requirements.
Will the new loan be based on what I spent or what the property is worth?
It depends on the program and how recently the project was completed. Some use the appraised value with little or no seasoning; others limit the loan to a percentage of cost for a period after completion. Ask about this early, because it decides whether you get cash out or bring cash in.
What if contractors have not been paid in full?
Unpaid balances and mechanics’ liens have to be resolved before a new lender’s title policy can issue. Plan to pay them at closing or clear them beforehand.
Is this a consumer loan?
No. These are business-purpose loans on investment and commercial property. If you built a home you will live in, that is a consumer transaction and a different conversation; see Home Loans.
Do you arrange takeout financing outside California?
Yes. Investor and commercial financing is available in most states, depending on the program and property type. Residential home loans are California only. Tell us the state and we will confirm up front.
Discuss Your Financing Scenario
Send the project, the construction loan balance and maturity, and where leasing stands. A loan advisor will review it and follow up.
The loans described on this page are business-purpose loans secured by investment or commercial real estate and are not consumer credit transactions. Blue Fox Capital Corporation arranges and places financing for real estate investors, builders and developers as a licensed mortgage broker. CA DRE 01527288 | NMLS 1840487. Daniel Eckhouse, NMLS 217328 | CA DRE 01977403. Business-purpose and commercial financing is available in select states through the programs Blue Fox Capital Corporation places, and is not available in every state. Consumer residential financing is offered in California only. Availability varies by program, property type and state, and is subject to lender approval. Programs, structures and availability vary by loan and are subject to change without notice, borrower qualification, property eligibility, appraisal and lender approval. Approval is not guaranteed. Not all applicants will qualify. This is not a commitment to lend. Equal Housing Opportunity. 66350 Pierson Blvd, Suite A, Desert Hot Springs, CA 92240 | (310) 756-3619 | dan@bluefoxcapital.com