Building a custom home in Port Royal is exciting, but the financing can feel complex. You want a smooth build, clear timelines and no surprises with draws or insurance. In this guide, you will learn the construction loan options that fit luxury coastal projects, how lender draws actually work, and the must‑know local steps that affect funding. Let’s dive in.
Why Port Royal financing is different
Port Royal is a low‑density waterfront enclave with very high land and home values. That often means larger down payments, detailed underwriting and lenders who understand high‑value custom homes.
Flood exposure is another factor. If any part of the home is in a Special Flood Hazard Area, lenders require flood insurance under Fannie Mae’s flood insurance rules. Start your flood zone check and insurance quotes early so premiums do not derail your budget.
Local permitting also shapes your timeline. Collier County collects impact fees and issues Certificates of Occupancy, and many fees are due before a CO is released. Lenders often tie final draws to these steps, which are outlined in the county code on permits, inspections and certificates.
Your construction loan options
Construction‑to‑permanent
This single‑close loan funds construction through draws and converts to a mortgage at completion or CO. You usually pay interest only on the amount drawn, and underwriting uses the as‑completed value. It is a popular choice when you want rate certainty and one closing. Learn more in this overview of how construction‑to‑perm loans work.
Stand‑alone construction loan
This short‑term loan covers only the build. You refinance into a permanent mortgage at completion, which adds a second closing and potential rate risk if the market changes.
Lot plus construction
If you are financing land and the build, lenders may treat the land at a lower loan‑to‑value and then fund construction by draws. Terms vary, so clarify how land costs, soft costs and contingency will be financed.
Owner‑builder and specialty programs
Owner‑builder, FHA or VA options exist, but luxury coastal projects usually require experienced builders and stricter approval. Expect detailed plans, a fixed‑price or GMP contract and stronger reserves.
What most lenders want: strong credit, larger down payment, full plans and specs, a signed fixed‑price or GMP contract, a schedule of values and a 10 to 15 percent contingency.
How draws work
Draw schedule basics
Construction funds release in stages as work is verified, not as a lump sum. Lenders or third‑party inspectors confirm progress before wiring each draw. Typical custom builds use several milestones such as foundation, framing, rough‑ins, finishes and final. See how lenders structure this in a guide to construction draw schedules.
Typical draw splits
Every lender is different, but a common pattern is: permits and mobilization, foundation, framing and roof, mechanical rough‑ins, interior finishes and a final punch list. Many lenders cap draws at about one per month, so plan contractor cash flow around inspection and funding days.
Retainage and timing
Many lenders hold back about 5 to 15 percent as retainage to ensure completion and punch list items are addressed. Policies vary, and some release part of the retainage at substantial completion and the rest after CO. Here is a lender comparison of retainage practices in construction lending.
Inspections and processing
Expect photo documentation, site checks and verification against your budget and schedule of values. Draw processing can take days, and some lenders fund on set calendar dates. Build a buffer so contractor payments do not stall waiting for wires.
Documents you will submit
At each draw, you will typically provide a contractor draw request, updated schedule of values, invoices, photos, proof of work completed and lien waivers from the contractor and subs. This checklist from a construction payment platform outlines common draw documentation.
Florida lien protections
Florida law gives subcontractors and suppliers lien rights if unpaid. Before work starts, record a Notice of Commencement. With every draw, collect properly executed lien waivers from the contractor and subs. Review Florida’s construction lien statute in Chapter 713 and make lien waivers a non‑negotiable part of your draw package.
Insurance, title and municipal triggers
Builder’s risk insurance
Lenders require builder’s risk coverage during construction. Coastal underwriting can be specialized, and market capacity shifts with insurer consolidations, as noted in recent builder’s risk market news. Set limits to the completed value and confirm flood coverage needs with your insurer.
Flood insurance and waterfront lots
If your site touches an SFHA map, your lender will require flood insurance under Fannie Mae’s rules. Premiums can be significant in Port Royal. Get determinations and quotes early so underwriting and monthly costs are accurate.
Title, impact fees and CO
Expect lender’s title insurance and possible escrows for taxes and insurance. Collier County impact fees are assessed on building permits, and lenders often make your final draw and conversion to permanent financing contingent on final inspections and issuance of the CO under county code requirements.
Conversion and final draw
For construction‑to‑perm loans, conversion usually happens at completion and CO, sometimes with a final appraisal to confirm as‑completed value. For construction‑only loans, you will refinance at completion, which means new underwriting and the rate available at that time.
Your Port Royal financing checklist
Before you apply
- Finalize plans and specs that match your budget.
- Secure a fixed‑price or GMP contract with a licensed Florida builder.
- Build a line‑item schedule of values and a 10 to 15 percent contingency.
- Confirm flood zone status and get early flood and builder’s risk quotes under Fannie Mae’s flood rules.
- Gather builder qualifications, licensing and insurance.
While draws are happening
- Align your contractor’s billing with your lender’s inspection and funding calendar.
- Prepare draw packages with invoices, photos and lien waivers to speed approvals.
- Track Collier County inspections and permit milestones since they affect funding and CO.
Avoid common delays
- Ask about draw timing and retainage up front to prevent cash crunches.
- Cap change orders and get lender approval before work shifts.
- Record the Notice of Commencement and require lien waivers each draw per Florida Chapter 713.
Choosing your lender and builder
- Favor lenders experienced with high‑value coastal custom homes and local permitting. Community or portfolio lenders often handle construction‑to‑perm efficiently for custom builds, a point echoed in industry guidance on specialized construction lending.
- Compare draw schedules, retainage, inspection methods and funding days, not just rates.
- Vet builders for similar coastal projects, insurance and subcontractor payment practices.
Ready to map out a financing path that fits your Port Royal build? Reach out to the Kaleena Figaro Group for local guidance on timelines, lender expectations and a smoother ground‑to‑CO process.
FAQs
Do I need flood insurance for a Port Royal construction loan?
- If any part of your home is in a Special Flood Hazard Area, most lenders will require flood insurance, so check your flood zone and quotes early.
How many lender draws should I expect when building in Port Royal?
- Many custom builds use 4 to 8 draws tied to milestones like foundation, framing, rough‑ins, finishes and final, with inspections before each release.
What is retainage and when is it released on custom homes?
- Retainage is a 5 to 15 percent holdback to ensure completion, commonly released at substantial completion and after CO once punch list items are resolved.
How do I avoid mechanic’s liens on a Florida new build?
- Record a Notice of Commencement before work starts and require properly executed lien waivers from the contractor and subs with every draw.
When does my construction‑to‑perm loan convert to a mortgage?
- Conversion usually happens at completion and issuance of the Certificate of Occupancy, sometimes after a final appraisal confirms the as‑completed value.
