Loan for 70k purchase price 40k rehab 20k what happens to 10 k

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I am arguing with my friend that the 10 k left over will add on to paying the loan off is this correct? Or is this added on to loan regardless if I spend or not? This is a hard money loan.

it can go either way. My lender will just leave it in escrow and only payoff what I've drawn.  Obviously the funds left in escrow go back to them and you only refi/payoff the draw amount. 

Make sense?