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Comment by geomark | Hacker News Reader

"You wouldn't start building a house when it's uncertain that you have enough money to be able to complete the project."

Sorry for the completely OT reply, but this triggered me because it is exactly how banks in Thailand do lending to build a house. Once all the details and total cost are known, the bank lends about half of the needed amount and then checks on your progress. If you didn't get about half the house built they don't fund the remainder.

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I think that’s common elsewhere as well. A construction loan in the US will work the same way and have a draw schedule that must be followed.

Interesting. I was unaware of that and thought it was a bizarre approach unique to banks in this so-called developing country.

I think it’s needed when the collateral for the loan is something that doesn’t yet exist. If you were to put up something other than your yet to be constructed home as the collateral you could do without a draw schedule. The bank is rightfully concerned that you build your house to the level you described in the plans so that they can recoup their money if you some day default.

So what happens to the half-built houses? Is it like kit cars, where there's a thriving market for other people's failed projects?

Some of them get finished other ways. Others get taken back by the bank when the owner decides to stop making payments on a loan for an unfinished house. You often see half finished houses that are slowly rotting.

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