📅 Wednesday, July 15, 2026 · By Kayak Capital · 9 min read

Hard Money Loans for New Construction in Phoenix

Metro Phoenix ranks #4 in the nation for new home construction, with over 39,000 housing units permitted in the past year. Population growth is still running at 1.5% annually. Buyers want new builds with modern floor plans, energy-efficient systems, and smart-home features that existing housing stock simply doesn't offer.

For investors and builders, that means opportunity. But financing a ground-up construction project is a different animal than financing a fix-and-flip. Construction loans have draw schedules, longer timelines, and a cost structure that punishes you if your lender loads up on fees.

Here's how hard money construction loans work in Phoenix — and why the lender you choose can make a $15,000+ difference in your bottom line.

How Construction Loans Differ from Fix-and-Flip Loans

If you've done fix-and-flip deals, you already understand hard money basics: asset-based underwriting, short-term hold, interest-only payments. Construction loans share that DNA, but three things change:

How a Construction Draw Schedule Works

A draw schedule is the roadmap for how your loan funds get released. Instead of one lump sum at closing, the lender releases money in phases — each tied to a construction milestone verified by an inspector.

Here's what a typical 5-draw schedule looks like for a spec home build in Phoenix:

The process for each draw is straightforward: you complete the milestone work, submit a draw request with invoices and progress photos, the lender sends an inspector to verify completion (usually within 3–5 business days), and funds are released within 24–48 hours after approval.

What Is Holdback?

Most construction lenders withhold 5–10% of each draw as retainage — a reserve that protects against incomplete work. If a subcontractor finishes rough framing but disappears before final tie-ins, the holdback covers the cost of hiring someone to finish. The retained amount is released with the final draw once the Certificate of Occupancy is issued.

The Hidden Fee Layer: Construction-Specific Costs

Here's what catches most builders off guard: construction loans come with an entire additional layer of fees that fix-and-flip loans don't have. On top of the origination points and processing fees you're already used to, typical lenders add:

The Math: A Queen Creek Spec Home Build

Let's run the numbers on a real-world spec home project in Queen Creek — one of Phoenix's fastest-growing construction markets.

Interest With Draw Schedule vs. Full Funding

Because construction loans fund in draws, you save on interest in the early months when only a fraction of the loan is outstanding:

If full amount funded at closing: $314,500 × 12% ÷ 12 × 10 = $31,450
Draw schedule interest savings: $31,450 − $23,590 = $7,860

The draw structure saves you $7,860 in interest compared to a standard fix-and-flip loan where the full amount funds at closing. That's money in your pocket before we even get to fees.

Full Cost Comparison

The fee difference: $14,685. With Kayak Capital, those fees don't exist — they never have across our 1,700+ transactions. And the ROI gap? 169.3% vs. 112.9% — that's the difference between an outstanding project and a good one.

Why Zero Fees Matter Even More for Construction

If you've read our posts on fix-and-flip financing, you know we're vocal about how fees destroy ROI. But for construction loans, the impact is even bigger — and here's why:

Longer timelines mean more fee exposure. A 10-month construction project is nearly double the timeline of a typical 5-month flip. More time means more opportunities for your lender to charge extension fees, draw fees, and inspection fees.

Construction-specific fees are a second fee layer. Fix-and-flip lenders charge origination and processing. Construction lenders charge those plus construction appraisals, draw inspections, and title updates. That second layer can add $6,000–$8,000 per project.

Delays are more common in new builds. Weather, permit backlogs, subcontractor scheduling, material delays — new construction has more moving parts than a rehab. The probability you'll need an extension is higher, making extension fee exposure a real concern.

Capital is tied up longer. In a flip, your cash is deployed for 5 months. In a build, it's 10 months or more. Fees paid upfront sit on top of that capital for the entire hold period, dragging down your annualized return.

Your Ground-Up Construction Checklist

Before you break ground, make sure you've covered these essentials:

1. Secure the lot under contract. In Phoenix's competitive land market, desirable lots in Queen Creek, Peoria, and North Phoenix move fast. Have your financing lined up before you start shopping.
2. Get plans and specs drafted. Your lender needs architectural plans and a detailed construction budget to underwrite the loan. The more detailed your scope, the faster the approval.
3. Line up your general contractor. Lenders want to see a licensed, insured GC with a track record. In Arizona, that means an active ROC license. If you're acting as owner-builder, be prepared to show construction experience.
4. Build a realistic timeline. Add 20–30% to whatever your contractor estimates. Phoenix summer heat (June–September) slows outdoor work — concrete pours, framing, and roofing are all weather-sensitive.
5. Budget for contingencies. Set aside 15% above your construction budget for surprises. On a $260,000 build, that's $39,000 in reserve. Site conditions, code requirements, and material price fluctuations are real.
6. Understand the draw process. Know exactly what milestones trigger each draw, what documentation you'll need, and how long your lender takes to fund after inspection. Delays between draws mean your crew sits idle — and idle crews find other jobs.
7. Choose a lender with no fee layers. Your lender should charge interest and nothing else. No origination, no draw fees, no extension fees. If they charge fees, ask them to quantify the total fee cost on your specific project — most borrowers have never done this math.

Build With Kayak Capital — Zero Fees, Start to Finish

Kayak Capital has been funding new construction projects across the Phoenix metro for nearly 15 years. Our approach is the same for construction as it is for every other loan product we offer:

Your interest rate is your only cost. Period.

That means:

• Zero origination points — even on 10+ month construction timelines
• Zero processing, underwriting, or admin fees — no junk fee line items at closing
• Zero construction appraisal fee — we underwrite based on the deal, not on how much we can charge to evaluate it
• Zero draw inspection fees — inspections protect both of us, so we absorb the cost
• Zero extension fees — if the build runs long, your rate stays the same. No penalty
• Zero prepayment penalty — finish early, pay off early, keep the savings

We lend our own capital — no fund managers, no broker chains, no middlemen. That's how we've maintained zero fees across 1,700+ transactions since 2013.