Question 1

What is a Florida construction interim loan?

Accepted Answer

A Florida construction interim loan is a short-term financing instrument that provides funds for building a new structure or substantially renovating an existing one. The loan funds the construction period (typically 12-24 months) and is structured around a draw schedule tied to construction milestones. Key features: the lender disburses funds in stages as work is completed, interest is typically interest-only during construction (calculated on the outstanding balance), a construction inspector verifies completion of each phase, lien waivers from contractors and subcontractors are required before draws, and the loan converts to permanent financing or is repaid at project completion. Florida’s construction lien law (Chapter 713) significantly impacts the draw process.

Question 2

How do Florida construction liens affect interim financing draws?

Accepted Answer

Florida Chapter 713 creates a complex lien framework that interim lenders must navigate: subcontractors and suppliers who are not paid can file construction liens against the property, which take priority over the construction mortgage in some circumstances. To protect the lender’s position: the lender requires a Notice of Commencement to be filed before construction begins, the lender collects lien waivers (partial and final) from the general contractor, subcontractors, and material suppliers before each draw, the lender may require a title search update before each draw to verify no liens have been recorded, and the lender includes a construction lien holdback (retainage, typically 10%) to ensure completion. The Notice to Owner requirement allows unpaid parties to preserve lien rights.

Question 3

What happens when a Florida construction interim loan matures?

Accepted Answer

At maturity, the interim loan must be resolved: for a construction-to-permanent (C-to-P) loan, the interim loan automatically converts to a permanent mortgage upon project completion and issuance of a certificate of occupancy. For standalone construction loans, the borrower must refinance into a separate permanent mortgage or pay off the interim loan from other sources (sale proceeds, other financing). If the project is incomplete at maturity, the lender may extend the loan (with additional fees and possibly a higher rate), declare a default and begin foreclosure, or negotiate a workout arrangement. Borrowers should build a cushion into the construction timeline to account for delays.

Interim Financing: Construction Florida

Construction Interim Financing in Florida

Loan Structure

Chapter 713 Requirements

Maturity Options

Related Terms

Barnes Walker Construction Finance

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