A takedown loan is a financing structure that lets subdivision builders and land developers purchase lots or parcels in scheduled phases rather than buying an entire tract at once. Instead of funding the full land cost upfront, the borrower "takes down" groups of lots on a predetermined schedule tied to their construction pace and sales velocity. This approach reduces carrying costs, limits interest exposure, and aligns capital deployment with actual market demand.
For builders developing 20, 50, or even 200+ lots, purchasing everything on day one creates massive financial risk. A takedown structure spreads that risk over time, letting you buy only what you can build and sell within a given period. Whether structured through a rolling option agreement, a blanket loan with partial releases, or a dedicated acquisition and development (AD&D) credit facility, takedown financing has become a cornerstone strategy in residential and commercial subdivision development.
Planning a phased subdivision project? Clearhouse Lending structures construction loans and development financing with built-in takedown schedules tailored to your build pace. Reach out to our team to get pre-qualified in 24 hours.
Need Financing for This Project?
Stop searching bank by bank. Get matched with 6,000+ vetted lenders competing for your deal.
What Is a Takedown Loan in Real Estate Development?
A takedown loan is a type of construction or land development financing where the borrower draws down funds in scheduled increments to purchase lots or parcels from a larger tract. Rather than closing on the entire property at once, the builder exercises a series of "takedowns" that transfer ownership of specific lots according to a pre-negotiated schedule and price.
The term "takedown" comes from the act of taking possession of a parcel. According to Law Insider, a takedown property is any parcel acquired by a purchaser under a lot purchase agreement in accordance with the takedown schedule. Each takedown event triggers a separate closing where the builder pays for and receives title to a defined group of lots.
This structure is most commonly used in three scenarios. First, when a builder is developing a subdivision and wants to match lot purchases with their building pace. Second, when a developer is selling finished lots to multiple builders through land banking arrangements. And third, when a lender is funding a phased acquisition, development, and construction (AD&C) loan where draws are tied to project milestones.
According to the National Association of Home Builders (NAHB), the land-light model built around takedown structures has become increasingly common since 2020 as builders seek to protect balance sheets while maintaining growth pipelines. Digital platforms now automate takedown scheduling and the back-and-forth between builders and land banking partners.
How Does a Builder Takedown Schedule Work?
A builder takedown schedule is a contractual timeline that specifies when, how many, and at what price lots will be purchased from a land seller or released from a blanket mortgage. Takedowns are typically structured on a monthly or quarterly basis, with each phase aligned to the builder's projected construction starts and sales closings.
Here is how a typical takedown schedule operates. The builder and the landowner (or land bank) agree on the total number of lots, the price per lot, the initial deposit or earnest money, the number of lots per takedown, and the intervals between takedowns. For example, a 100-lot subdivision might be structured as 10 takedowns of 10 lots each, spaced 60 days apart.
The builder usually pays a non-refundable deposit at signing to secure the entire tract. This deposit - often 5% to 15% of the total land value - demonstrates commitment and compensates the seller for holding inventory off the market. Each subsequent takedown requires the builder to close on the specified lots and pay the agreed price.
Most agreements include acceleration and deceleration provisions. Builders who sell faster than expected can accelerate their takedowns, purchasing lots ahead of schedule. Conversely, if market conditions soften, some contracts allow for deceleration, though this typically comes with penalties or forfeiture of deposits.
According to Pro Builder, the takedown schedule should be closely aligned with the builder's delivery schedule to avoid carrying excess lots with unproductive interest expense.
What Is the Difference Between a Takedown Loan and a Blanket Loan?
A takedown loan and a blanket loan are related but serve different functions in subdivision financing. A takedown loan funds the phased purchase of lots over time, while a blanket loan covers multiple properties under a single mortgage with a partial release clause that allows individual parcels to be sold off.
The key distinction is structural. A blanket mortgage secures all properties from day one under one lien. As the borrower sells or develops individual lots, they request partial releases, paying down a specified amount to free each parcel from the mortgage. According to Rocket Mortgage, blanket mortgages are popular among developers, investors, and builders because they consolidate multiple properties into one payment with one set of closing costs.
A takedown loan, by contrast, does not require the borrower to purchase all lots upfront. The builder acquires lots incrementally according to the takedown schedule, only taking ownership and financial responsibility as each phase is triggered. This means the builder never holds title to (or pays interest on) lots they are not yet ready to develop.
In practice, many subdivision deals combine both concepts. A developer might obtain a blanket AD&C loan that funds the entire project but structures draws as takedowns, with partial release provisions for selling individual finished lots. Use our commercial mortgage calculator to model how different structures affect your monthly carrying costs.
What Are the Requirements for a Takedown Loan?
Lenders evaluating takedown loan applications focus on the borrower's development experience, the project's feasibility, the absorption rate for the market, and the builder's financial capacity to execute the full takedown schedule. Requirements are generally stricter than a standard commercial mortgage because the lender is financing an active development project with construction and sales risk.
Experience. Most lenders require the borrower to have completed at least two to three comparable subdivision projects. Track record matters because takedown financing depends on the builder's ability to construct and sell homes at the projected pace.
Down payment. Borrowers should expect to contribute 20% to 35% of the total project cost as equity. According to Capital Fund 1, subdivision development loans typically require at least 25% to 30% down.
Loan-to-value (LTV). Maximum LTV ratios for takedown and AD&C loans generally range from 65% to 80% of the as-completed appraised value. Lenders may also calculate loan-to-cost (LTC) at 70% to 85%.
Absorption study. The lender will require a market absorption analysis demonstrating that demand supports the projected sales pace. If the local market can absorb only 5 homes per month but the builder plans to take down 15 lots per month, the deal is unlikely to pencil.
Personal guarantee. Most takedown loans require a full personal guarantee or recourse from the principals, particularly for projects under $10 million.
Pre-sales. Some lenders require a percentage of lots or homes to be pre-sold before funding the first takedown, typically 20% to 40% of the initial phase.
Ready to see if your subdivision project qualifies? Clearhouse Lending offers horizontal construction loans and vertical construction loans with flexible takedown structures. Schedule a consultation to discuss your project today.
How Do Takedown Loans Benefit Subdivision Developers?
Takedown loans provide subdivision developers with significant financial and operational advantages compared to purchasing an entire tract outright. The primary benefit is reduced capital exposure, but the advantages extend to interest savings, risk management, and improved return on equity.
Lower carrying costs. Because you only own and pay interest on the lots you have taken down, your monthly debt service is dramatically lower than it would be under a full-acquisition blanket loan. For a 100-lot project at $50,000 per lot, purchasing all lots at once means carrying $5 million in land debt from day one. A takedown schedule of 10 lots per quarter means you initially carry just $500,000.
Reduced market risk. If the housing market slows, you are not stuck holding 100 lots you cannot sell. With most takedown agreements, you can pause or decelerate takedowns (subject to contract terms), limiting your downside exposure.
Better return on equity. By deploying capital incrementally, your equity is working on active construction rather than sitting in undeveloped lots. This can improve your internal rate of return (IRR) by 200 to 500 basis points compared to a full upfront purchase.
Improved lender relationships. Lenders prefer takedown structures because they reduce the bank's exposure at any given time. This can result in more favorable terms, lower interest rates, and higher overall credit limits for the borrower.
Takedown obligations are not considered debt by most lenders for the purposes of calculating credit ratios, which helps builders maintain borrowing capacity for other projects, according to Wall Street Oasis.
What Are Typical Takedown Loan Rates and Terms?
Takedown loan rates in 2025 and 2026 typically range from 7.5% to 12% depending on the borrower's experience, the project location, the loan-to-value ratio, and whether the lots are raw, entitled, or fully improved. Terms are short, usually 12 to 36 months per takedown phase, with the overall project timeline stretching two to five years.
According to New Silver, construction loan rates in 2025 generally fall between 6.5% and 9% for well-qualified borrowers, though AD&C and subdivision-specific financing skews higher due to the additional risk involved. The NAHB reported that average land development loan rates reached 11.77% in mid-2025, while speculative single-family construction loans averaged 12.82%.
Here is what builders should expect across the major cost categories.
Interest rate: 7.5% to 12%, typically floating at prime plus 1% to 4%.
Origination fee: 1% to 3% of the total commitment amount.
Extension fee: 0.25% to 0.50% per extension period (usually 3 to 6 months).
Non-refundable deposit: 5% to 15% of total land value paid at signing.
Per-lot takedown price: Negotiated upfront, often with 1% to 3% annual escalators.
Draw fees: Some lenders charge $150 to $500 per draw inspection.
Use our commercial bridge loan calculator to estimate your carrying costs across different rate and term scenarios.
How Do Partial Releases Work with Takedown Financing?
A partial release is a contractual provision that allows a borrower to remove individual lots or parcels from a blanket mortgage lien after paying a specified release price to the lender. In takedown financing, partial releases are the mechanism that lets builders sell finished homes or lots without having to pay off the entire loan balance.
According to C-Loans, the typical partial release clause requires the developer to pay down the loan by 110% to 125% of the proportional per-unit loan balance before the lender will release the lien on that specific parcel. This "premium" protects the lender by ensuring the remaining collateral always exceeds the remaining loan balance.
Here is how it works in practice. Assume a builder has a $5 million blanket loan covering 50 lots. The proportional per-lot loan balance is $100,000. Under a 120% partial release clause, the builder must pay $120,000 to release each lot from the mortgage. When the builder sells a finished home for $350,000, the $120,000 release payment is made to the lender, and the builder retains the remaining $230,000 (minus construction costs and other expenses).
The partial release schedule should be negotiated carefully. Key terms to address include the minimum number of lots that must be released per period, the order in which lots can be released (lenders sometimes restrict releasing the most valuable lots first), and any conditions that must be met before a release is granted (such as completion of infrastructure or obtaining a certificate of occupancy).
This concept is closely related to ADC loan structures, where draws and releases are tied to specific development milestones. You can also learn more about phased construction approaches in our guide to spec construction loans.
When Should Builders Use Takedown Financing vs Other Loan Types?
Builders should use takedown financing when developing subdivisions of 10 or more lots, when market conditions are uncertain, or when they want to preserve capital for multiple concurrent projects. However, takedown loans are not always the best fit, and understanding when to choose alternative structures is just as important.
Choose a takedown loan when:
- You are developing a subdivision with 10 to 200+ lots and want to phase purchases over time
- You need to match lot acquisitions with your construction pace and sales velocity
- You want to minimize carrying costs and interest exposure during the development period
- The land seller or land bank is willing to negotiate a rolling option or phased purchase agreement
- You want to maintain borrowing capacity for other projects since takedown obligations typically do not count as debt on your balance sheet
Choose a blanket loan when:
- You are acquiring a smaller number of properties (2 to 10) that you intend to hold or develop simultaneously
- The seller requires a full purchase at closing with no phased options
- You want the simplicity of a single loan covering all parcels
Choose an AD&C loan when:
- You need financing that covers land acquisition, development (roads, utilities, grading), and vertical construction under one facility
- The project involves both horizontal and vertical work, as detailed in our home builder construction loans guide
Choose a bridge loan when:
- You need short-term capital (6 to 18 months) to acquire land before securing permanent or construction financing
- You are acquiring a distressed or time-sensitive property, as explained in our guide to bridge loans
Frequently Asked Questions About Takedown Loans
What is the minimum number of lots for a takedown loan?
Most lenders require a minimum of 10 to 15 lots to justify a formal takedown structure. For smaller projects of fewer than 10 lots, a simple blanket loan with partial release provisions is usually more practical and cost-effective.
Can I accelerate my takedown schedule if sales are strong?
Yes, most takedown agreements include acceleration clauses that allow builders to purchase lots ahead of schedule when demand exceeds projections. However, acceleration is typically subject to lot availability and may require advance notice to the seller, usually 15 to 30 days.
What happens if I cannot complete a scheduled takedown?
If you miss a scheduled takedown, the consequences depend on your contract terms. Common penalties include forfeiture of your earnest deposit on the missed phase, potential termination of the remaining option agreement, and loss of preferential pricing on future takedowns. Some agreements allow for a limited number of deferrals, but this must be negotiated upfront.
Do I pay interest on lots I have not yet taken down?
No. One of the primary advantages of takedown financing is that you only pay interest on lots you have actually purchased and closed on. Lots still held by the seller or land bank do not generate interest charges for the builder.
How do takedown loans work with land banking?
In a land banking arrangement, a third-party entity purchases and holds the lots, and the builder enters into a takedown agreement to purchase finished lots on a scheduled basis. The land bank handles entitlement and development costs, and the builder pays a premium per lot in exchange for reduced balance sheet exposure.
Are takedown loans available for commercial (non-residential) projects?
Yes, takedown structures are used in commercial subdivision projects including industrial parks, office campuses, and retail pad site developments. The same phased-purchase logic applies, though terms and requirements may differ from residential projects.
Ready to structure takedown financing for your next subdivision project? Clearhouse Lending specializes in construction and development loans for builders and developers nationwide. Our advisors can help you design a takedown schedule that matches your build pace and market conditions. Get pre-qualified in 24 hours.