He used the remaining 15% + other cash he had saved: and renovated the home, Added an ADU in the city of el sereno (90032). 

Length of term should be expected remaining life duration plus a margin.Note $180K, 10 year, 2.5% is $1697. 

We put a label on the key lock door that says "Door Must Remain Locked at All Times".

So, the supply of housing suddenly all but stopped growing.The demand for housing, however, remained on it's existing course with only a slight dampening due to the dearth of lending and rentals.

The equity that will presumably have to remain will be 20%, so if the ARV is $145,000, then the refinance will be for $116,000.  

The closing document shows we paid $7800 (100%) to the buyers instead of the remaining 45%. 

I believe a typical commercial loan will be at 65% LTV... but in the commercial world the lender may allow a seller carry back of some or all of the remaining 35% with a 2nd position loan/mortgage/lien.Things to know about commercial loans... they'll have shorter amortization (generally 20 years versus 30 on residential)... higher interest rates (generally a full point higher)... will be variable versus fixed... and will likely have a balloon payment.I don't know of any Florida realtors but you want to look for a commercial realtor. 

If there was equity, the heirs would likely sell the property to satisfy the loan and then obtain the equity.  

$X dollars per month will earn $Y amount of equity annually and over the remaining life of the loan.  

In total you will have to pay 45k to get the 355k to rebuild your house--(10% penalty) 40k + 1k (deductible) + 4k (remaining difference balance) to activate a 355k dispersal = 400k balance for construction.