In one sentence
A guaranty that construction will be finished, lien-free and on time, backing a construction loan beyond payment.
The longer version
Distinct from a payment guaranty, a completion guaranty obligates the sponsor to complete the project even if it costs more than the loan provides. It protects the lender from a half-built collateral.
Completion guaranties pair with budgets, contracts, and bonds as the construction risk package, and each piece becomes a closing checklist line.
Common questions
- What is a completion guaranty?
- A guaranty that construction will be finished, lien-free and generally on time, backing a construction loan with the sponsor's obligation to complete or fund completion.
- How is a completion guaranty different from a payment guaranty?
- A completion guaranty covers finishing the project. A payment guaranty covers the debt. Construction loans often have both, sometimes with the payment guaranty limited in amount.
- When does a completion guaranty end?
- On completion as defined in the loan, usually substantial completion, a certificate of occupancy, and payment of all construction costs with lien releases.
Keep reading
- The construction loan closing checklistThe initial close, then the monthly draws.
- The commercial loan closing checklistWhat goes on the list and who owns each line.
- The due diligence checklist, built to be runChecklists as systems, not documents.
- Loan closing softwareWhere this item is cleared before funding.