Your builder invoices, your lender inspects, and only then does money move. Nothing is paid in advance.
Construction loan progress payments follow the building contract. The builder claims at each completed stage, the lender inspects or values, and funds are released directly to the builder.
Construction loan progress payments release your loan in stages as the build reaches defined milestones. You pay interest only on what has actually been drawn, which is why repayments start small and climb through the build.
Construction loan progress payments follow the building contract. The builder claims at each completed stage, the lender inspects or values, and funds are released directly to the builder. Interest accrues only on drawn amounts, and the loan converts to principal and interest at completion.
No lender pays a builder in advance. Every construction loan progress payment follows completed work, and that sequence is the borrower's main protection.
Percentages vary between contracts. Check your own schedule, since a front-loaded schedule shifts risk toward you.
Every construction loan progress payments schedule follows the same physical build order.
The slab frame lockup fixing completion sequence is standard across Australian residential building contracts, though the naming varies slightly between the HIA and Master Builders forms.
The mechanics matter, because construction loan progress payments never go to you.
Construction loan drawdown stages therefore take one to two weeks each from claim to payment. Build that into your expectations rather than assuming same-day release.
This is the part borrowers find most reassuring once it is explained.
Interest is charged only on funds actually drawn. After the slab stage on a $600,000 build you might have $90,000 drawn, so you are paying interest on $90,000 rather than the full loan.
Almost every lender applies this rule, and it surprises borrowers who expected to draw immediately.
The practical effect is that you fund the deposit and often the slab stage yourself, which is worth planning for in your cash flow.
The schedule sits in your building contract and deserves proper attention before signing.
A builder progress claim schedule that pays sixty per cent by frame stage leaves you exposed. Have your solicitor review it before you sign.
Variations are the most common reason a construction budget breaks.
Your loan is approved against the original contract sum. A variation adds cost that the lender has not approved, so it generally must be funded by you in cash unless you apply to increase the facility, which requires reassessment.
These must be satisfied before the first construction loan progress payment is released.
Each of these delays construction loan progress payments or costs you money.
Four items in the building contract that matter most.
The builder claims at each completed stage, you authorise the claim, the lender inspects or values the work, then funds are released directly to the builder. Nothing is paid in advance, and interest accrues only on amounts drawn.
Base or slab, frame, lockup, fixing and completion, preceded by the initial deposit. Typical shares are around 5% deposit, 10 to 15% slab, 15 to 20% frame, 25 to 35% lockup, 20 to 25% fixing and 5 to 10% at completion.
No. Interest is charged only on funds actually drawn. Early in the build your repayment is small because little has been released, and it rises with each drawdown until the full amount is advanced.
You should not authorise it. The lender will inspect or value before releasing funds, and work that is not complete will not be approved. Raise it with your builder and, if needed, your solicitor.
Generally one to two weeks from claim to payment. The lender’s inspection or valuation typically takes three to seven business days, then a further one to three business days for funds to reach the builder.
No. Funds are released directly to the builder against completed work. This protects you as much as the lender, since it prevents payment for work that has not been done.
Your loan was approved against the original contract sum. Variations generally must be funded by you in cash, unless you apply to increase the facility, which requires a fresh assessment and can delay the programme.
At practical completion, once the final drawdown is made. The loan then reverts to principal and interest over the remaining term, and your repayment steps up accordingly.
Construction loan progress payments run smoothly when the contract, the lender and the programme all line up. Getting that alignment right before you sign is the work.
This guide was reviewed by Paritosh Wadhwani, Director and principal broker at APW Finance Pty Ltd, Bella Vista NSW. For standard purchases see our home loans Sydney page.
APW Finance Pty Ltd delivers expert lending solutions with personalised service, empowering clients across residential, commercial, and business sectors.