Two days before a scheduled closing earlier this month, a borrower called us. He'd finalized his renovation plan, and it wasn't the plan we'd underwritten. He was adding a second full bathroom and moving the laundry inside — turning a 3-bed, 1-bath into a 3/2.
The Call Every Lender Gets — and Dreads
Understand what that call means at most lending shops. The docs are drawn. The file has been through underwriting, maybe through a committee, maybe through a capital partner who bought the loan before it closed. A change to the project means a change to the collateral, which means the file goes back through the machine. The standard answers are:
1. "Close as papered." Keep the old loan, fund the difference out of your own pocket, and hope your cash holds through the project.
2. "We'll restart underwriting." New file, new timeline, new closing date — and a seller who may not wait.
Both answers punish the borrower for improving the project. That's backwards.
What Happened Instead
We re-ran the numbers the same day. As a 3/2 with interior laundry, the property supported a $265,000 after-repair value — up from $255,000 as a 3/1. The stronger ARV meant the loan could grow from $177,500 to $185,000 and still sit right at 70% of ARV, inside the same guardrail every loan we write lives under.
New documents in 48 hours. Same closing date. The borrower closed on the better project, not the one that happened to be papered first.
Why We Can Do This and Most Shops Can't
There's no magic in the 48 hours. It comes down to two structural facts about how we're built.
The underwriting sits in-house. The person who approved the loan is the person who re-cuts it. There's no committee to reconvene, no underwriting queue to re-enter, no second institution that has to be persuaded. When the facts change, the analysis changes the same day.
We lend our own capital. There's no loan buyer or capital partner downstream whose approval the file needs. The capital that funds your loan was committed before we ever wrote the term sheet, so a re-cut is a decision, not a negotiation. More on that here: A Yes That Holds: Why We Lend Our Own Capital.
The Honest Caveat: The Re-Cut Goes to the Number the ARV Supports
This is not a story about a lender that says yes to whatever number you ask for.
The borrower's first ask, built off an early contractor quote, would have pushed the loan to roughly 79% of ARV. That was a no — not because the project was bad, but because 79% leaves nobody room to be wrong. We cap our loans at 70% of ARV, on the first paper and on every re-cut after it. The 30% gap is the borrower's cushion as much as ours: it's what absorbs a slow month, a rehab surprise, a soft comp. Why we hold that line: Why We Cap Every Loan at 70%.
So the re-paper conversation has two possible outcomes, and both are fast: the ARV supports the new number and the loan changes, or it doesn't and you know immediately — while you can still adjust the plan.
What This Means for How You Run Your Deals
Don't build the wrong project because the right one wasn't papered. If your plan genuinely improves mid-deal, say so early. The worst time to surface a scope change is at the first draw request.
Bring the change with its numbers. A re-cut is an underwriting event. What moved: the scope, the cost, the ARV? The faster those numbers are on the table, the faster the answer.
Expect the guardrail. A lender who re-cuts to any number you ask for isn't flexible — they're careless, and eventually that catches up with their borrowers. Flexibility on structure, rigidity on the cap. That's the combination that protects you.
Renovation plans change. That isn't a failure of planning — it's what happens when operators keep thinking after the contract is signed. Your lender should be able to keep up.