Bind builder's risk + finalize financing draws

Builder's Risk insurance

A Course of Construction / Builder's Risk policy covers the structure during construction (fire, theft, vandalism, weather damage, sometimes more). Lender-required if you're financing.

• Cost: $500 – $1,500 for a 6-month policy, or 1–4% of completed value annually.
• Notify your homeowner's carrier before construction starts — many policies require disclosure or attach a construction endorsement.
• After substantial completion, swap to a landlord/dwelling fire policy if the cottage is being rented.

Verify any insurance agent via the WA Office of the Insurance Commissioner.

Financing draw schedule

If you're using construction financing (HELOC, cash-out refi, renovation loan, or one-time-close construction-perm), align the lender's draw schedule with the GC contract milestones. The standard sequence:

1. Initial draw at mobilization (or covered by your deposit).
2. Foundation completion.
3. Framing / dry-in.
4. MEP rough complete.
5. Drywall complete.
6. Substantial completion / Certificate of Occupancy.

Each draw needs a lender inspection. Build in a few business days of lag at each milestone — the GC mobilizes the next phase only after the draw is funded.

A note on financing

HomePlan doesn't provide financial advice. The patterns most Seattle DADU owners describe:

• Appraisal often lags real construction cost. ARV (after-renovation value) on Seattle DADU comps is still relatively thin in many neighborhoods.
• GSE cash-out is capped at 80% LTV — a hard limit for owners with sub-4% mortgages locked in 2020–2022 who don't want to refinance.
• The actual exit is a refinance after stabilization — short-term debt during the build, refinance into conventional once the unit is income-producing or has a year of seasoned equity.

Verify any lender or mortgage loan officer at NMLS Consumer Access.