New Construction Hard Money Loans

 

New construction loans, also known as ground-up construction loans are a type of hard money loan. These are short-term asset-based financing products offered by private lenders. These loans fund land acquisition and new build for profit through sales or rentals. Unlike traditional loans with heavy documentation and slow approvals, Easy Street Capital's EasyBuild program prioritizes project potential and builder experience. This collateral driven approach focuses on property equity over borrower credit. The loans offer short terms and fast funding, which is ideal for investors needing quick capital to seize opportunities in competitive construction markets.

 

If you're getting started in the space, there may be some terms you are unfamiliar with. The glossary below helps to define some of the key terms so you can feel informed as you evaluate ground-up construction projects and financing options.

 

 

 

Key Terms for New Construction Financing

 

What is ARV? | After-Repair Value

 

In the context of new construction loans, the After-Repair Value (ARV) estimates a property's market value upon completion of the build. Calculated using architectural plans, specifications, and local market comparables, ARV helps lenders assess project profitability and set loan limits to ensure the funding aligns with the property's anticipated worth.

 

 

What is LTC? | Loan-to-Cost Ratio

 

The Loan-to-Cost (LTC) ratio indicates the percentage of total project costs—land acquisition, materials, labor, and permits—that a lender will finance. For example, a $150,000 land purchase plus $250,000 in construction costs totals $400,000. An 85% LTC with EasyBuild covers $340,000, with the investor funding the remaining costs. This metric balances risk and equity for construction financing.

 

 

What is LTV? | Loan-to-Value Ratio

 

The Loan-to-Value (LTV) ratio compares the loan amount to the property's appraised value, typically based on the ARV for new builds. For a $500,000 ARV with a 70% LTV, borrowing with EasyBuild is capped at $350,000, with the builder covering the remaining balance. LTV safeguards lenders against defaults or market drops by shaping the loan's terms.

 

 

What are Construction Draws? | Construction Draws

 

Construction draws are phased fund disbursements tied to milestones like site preparation, framing, or final inspections. Investors spend funds upfront and request reimbursement draws by submitting photos to verify progress. Easy Street Capital's EasyBuild loan program offers 100% construction financing with 48-hour draw processing to accelerate cash flow, streamline budgets, and minimize risk for builders.

 

 

What are Soft Costs? | Soft Costs

 

Soft costs in new construction loans cover non-physical expenses like architectural plans, permits, and legal fees, incurred during project initiation up to foundation pouring. Unlike hard costs (e.g., materials, labor), soft costs support planning and approvals. The EasyBuild loan program reimburses these costs as part of its 100% construction financing, with builders submitting simple documentation for next-day reimbursements.

 

 

What are Hard Costs? | Hard Costs

 

Hard costs refer to direct, tangible expenses in new construction projects, including materials, labor, equipment, and site work like foundation and framing. These form the bulk of a project’s budget, distinct from soft costs. With EasyBuild, hard costs are factored into the LTC ratio and reimbursed through draws to ensure efficient funding for physical build elements.

 

 

What is a Build-Ready Lot? | Build-Ready Lot

 

A build-ready lot, also known as a pad-ready or improved lot, is land prepped for immediate construction with utilities, grading, and access installed. It reduces upfront site preparation costs and timelines. Financing a build-ready lot simplifies approvals and accelerates ground-up projects.

 

 

What is Subdividing a Lot? | Subdividing a Lot

 

Subdividing a lot involves dividing a single parcel of land into multiple smaller lots for development. It requires zoning approvals, surveys, and infrastructure planning. Subdividing maximizes land value for multi-unit builds. With new construction financing, Easy Street Capital’s EasyBuild loan can cover subdivision costs, including soft costs, to help investors scale projects profitably.

 

 

What are Building Permits? | Building Permits

 

Building permits are official approvals from local authorities required before starting construction, renovations, or additions to ensure compliance with codes for safety, zoning, and environmental standards. Required for any structural work, they involve submitted plans and inspections. The EasyBuild program reimburses permit fees as soft costs.

 

 

What is Interest Reserve? | Interest Reserve

 

An interest reserve allocates a portion of new construction loan funds to cover interest payments during the build phase, when no revenue is generated. This reserve is deducted monthly to ease cash flow burdens. The EasyBuild program includes interest reserves to support builders through their ground-up construction projects. This reduces financial stress until refinancing or property sales are complete.

 

 

What is Builder's Risk Insurance? | Builder's Risk Insurance

 

Builder’s risk insurance safeguards against losses during new construction by covering damages from fire, theft, vandalism, or weather to materials, equipment, and structures. Lenders typically require this coverage for ground-up projects to mitigate any risks.

 

 

What is a Change Order? | Change Order

 

A change order documents modifications to the original new construction plans, including design changes or material updates, with details on cost and timeline impacts. Approval is necessary to prevent disputes in ground-up builds. The EasyBuild loan accommodates change orders within project budgets, allowing flexibility while preserving LTC ratios.

 

 

What is Contingency Reserve? | Contingency Reserve

 

A contingency reserve sets aside additional funds, typically 5-10% of the budget, for unexpected expenses like delays or overruns in new construction projects. This buffer is critical for risk management in ground-up construction. EasyBuild integrates contingency reserves into loan structures to protect investors from unforeseen challenges in new construction financing.

 

 

What is a Spec Home? | Spec Home

 

A spec home is a speculative property constructed without a pre-committed buyer that relies on market demand for quick resale or rental in new construction. This approach carries risk but offers profit potential. Easy Street Capital’s EasyBuild loan finances spec homes for investors by using ARV to facilitate fast ground-up construction progress.

 

 

What is a Certificate of Occupancy? | Certificate of Occupancy

 

A certificate of occupancy (CO) certifies that a construction building meets codes and is safe for use, issued after final inspections by local authorities. Obtaining a CO is essential in property sales or occupancy. It signals project completion and allows refinancing or sales in ground-up construction projects.

 

 

What is Zoning? | Zoning

 

Zoning consists of local regulations that categorize land for specific uses, such as residential or commercial, to control density and building types in new construction. Compliance is crucial for obtaining permits, and investors must confirm zoning suitability. The EasyBuild program evaluates zoning during approvals to avoid delays in ground-up development.

 

 

What is a Variance? | Variance

 

A variance grants an exception to zoning regulations for unique situations, permitting deviations like adjusted setbacks or heights in new construction. It involves applications and hearings for approval. Variances expand possibilities for ground-up projects. Easy Street Capital supports variance-related costs through soft cost reimbursements.

 

 

What is Site Preparation? | Site Preparation

 

Site preparation encompasses clearing, grading, and utility installation on land prior to new construction to create a stable foundation for building. This step is an early hard cost in ground-up projects. Easy Street’s EasyBuild loan finances site preparation through initial draws to speed up timelines for investors with new construction loans.