Construction Loans

Construction loan progress payments explained: how drawdowns actually work

Published 26 June 2026 · Updated 26 June 2026 · 6 min read · By Shane Heness, mortgage broker

A construction loan does not release the whole loan at settlement. The lender pays your builder in stages as the build progresses, usually five of them: slab, frame, lock-up, fit-out and completion. You only pay interest on what has actually been drawn, so repayments start small and climb through the build. Each progress payment takes roughly five to ten business days from invoice to funds, because the bank sends a valuer to confirm the work was done before it releases money.

Progressive drawdowns are where construction finance goes wrong for most people. Not at approval. At draw three, when the builder is waiting on money and nobody can tell them when it is coming.

The five standard stages

Builders and lenders use broadly the same stage names, and the percentages below are the common split on a fixed price residential contract. Your contract may vary, and the contract percentages are what the lender pays against, not these.

Typical construction drawdown schedule
Stage	Typical % of contract	What has to be finished	Typical elapsed time
1. Deposit	5%	Contract signed, council approval in hand	At or shortly after land settlement
2. Base or slab	15% to 20%	Site cleared, footings poured, slab down and cured	Weeks 1 to 6
3. Frame	20%	Frame erected and approved by the frame inspection	Weeks 6 to 12
4. Lock-up	25% to 35%	Roof on, external walls, windows and external doors in, house can be locked	Weeks 12 to 22
5. Fit-out or fixing	20%	Internal linings, cabinetry, doors, skirting, tiling	Weeks 22 to 32
6. Practical completion	5% to 10%	Everything finished, final inspection passed, handover	Weeks 32 to 44

Indicative only, based on standard fixed price residential contracts. Timeframes assume a single storey or standard double storey build without significant delays.

How a single drawdown actually runs

The sequence is the same every time, and knowing it is what stops the mid-build panic.

1Day 0
Builder issues the progress claim
The builder invoices for the completed stage. It goes to you, not to the bank. Nothing happens until you pass it on.
2Day 0 to 1
Claim submitted to the lender
You authorise the claim and it goes to the lender, usually with a signed drawdown request. We do this part for our clients the same day it arrives.
3Day 1 to 5
Progress inspection
The lender instructs a valuer to attend the site and confirm the stage is genuinely complete. Not every lender inspects every stage, but most inspect at least slab, lock-up and completion.
4Day 5 to 8
Report returned and payment authorised
If the report confirms the stage, the lender releases funds against the contract percentage.
5Day 6 to 10
Funds reach the builder
Paid directly to the builder's nominated account. Your loan balance increases by that amount and so does your next repayment.

What your repayments look like through the build

This is the part clients consistently underestimate. You pay interest only on the drawn balance, which means your repayment is small at slab stage and several times larger by completion. On top of that, most people building are also paying rent or an existing mortgage at the same time.

Interest through a build: $600,000 land plus $500,000 build at 6.0% p.a., interest only
Stage	Cumulative drawn	Approximate monthly interest
Land settled	$600,000	$3,000
After slab (20%)	$700,000	$3,500
After frame (40%)	$800,000	$4,000
After lock-up (70%)	$950,000	$4,750
After fit-out (90%)	$1,050,000	$5,250
Practical completion (100%)	$1,100,000	$5,500

Illustrative only at a flat 6.0% p.a. interest only. Rates vary by lender and change over time. This is not a quote.

Budget for the completion figure plus your current housing cost, not the slab figure. That single planning decision prevents most of the stress we see in month eight.

The three things that hold drawdowns up

1. The claim sitting in your inbox

By far the most common cause. The builder invoices on a Friday, it gets noticed the following Wednesday, and five days have gone before the bank has seen anything. Forward it the day it arrives, every time.

2. Variations that were never approved

If you and the builder agreed to upgrade something mid-build and the contract sum went up, the lender approved against the original figure. The extra has to be funded, either from your own cash or through a loan increase, and a loan increase means a new assessment. Sort variations before the work happens, not when the invoice lands.

3. The inspection disagreeing with the builder

Occasionally the valuer says a stage is not complete when the builder says it is. That is a conversation between the builder and the lender, and it usually resolves in a few days, but only if someone is driving it. We chase these rather than leaving the client in the middle.

What to have ready before you sign a build contract

A fixed price contract, not a cost plus arrangement. Most lenders strongly prefer fixed price, and some will not lend on anything else.
Council approval or a complying development certificate, with stamped plans matching the contract.
Builder's home warranty insurance for the contract value, in your name.
The full specification and inclusions schedule. The valuer values what is specified, so vague inclusions produce conservative valuations.
A contingency of five to ten percent held outside the contract, in cash. Site costs, retaining walls and service connections are the usual sources of surprise.

Where a broker earns their keep on a construction loan

Not at approval. At draw four, when the frame inspection is booked for a date that does not suit anyone and the builder is threatening to demobilise. Managing the drawdown process is the actual work, and it runs for the whole build rather than for the four weeks around settlement.

Land and build as one transaction, or two

House and land packages are usually two contracts: one for the land, one for the build. The land settles first, on a normal settlement timeline, and the construction facility sits behind it. That structure has consequences worth planning for.

The land settles before the build starts. You are paying interest on the land for however long it takes to get construction underway, which in a new estate can be many months while titles register.
Two valuations. One on the land at settlement, one as-if-complete on the build.
The approval has to cover both. A common mistake is settling land on a loan approved as a land loan only, then discovering the construction component needs a fresh application at current assessment rates.
Titles can be delayed. Registration delays in new estates are routine. Loan approvals expire, usually at 90 days, and a re-approval is assessed against your position then, not your position now.

The practical answer is to get both components approved together at the outset wherever the lender allows it, and to check the expiry date on the approval against the estimated title registration date before signing the land contract.

If your income changes mid-build

Lenders do not usually re-assess servicing at each drawdown, so a job change partway through a build is not automatically a problem. It becomes one if the lender re-verifies before the final drawdown, which some do, or if a variation requires a loan increase. If your circumstances are going to change during the build, tell your broker when it happens rather than when the next claim is due. There is almost always a way to manage it with notice and almost never one without.

We handle progress claims on our clients' behalf from slab to handover, so the claim goes to the lender the day the builder issues it. Our construction loans page sets out how we structure these, including knockdown rebuilds and dual occupancy builds, or you can book a free call and we will map your build against a realistic funding timeline.

Frequently asked questions

No. You pay interest only on the amount drawn down so far. If the lender has released the land settlement plus a slab payment, you pay interest on that balance, not on the full approved facility. Repayments therefore climb through the build and reach their full level after the final drawdown.

Five to ten business days from the builder issuing the invoice to funds landing in the builder's account, assuming an inspection is required. The bank orders a progress inspection, the valuer attends, the report comes back, then the payment is authorised. Submitting the claim the day it is issued rather than at the end of the week is the easiest way to keep it at the short end of that range.

A variation has to be funded. If the lender approved on a fixed price contract, an increase means either you pay the difference in cash, or you apply to increase the loan, which means a fresh assessment and usually a fresh valuation. This is why a contingency of five to ten percent held outside the contract is worth having before you start.

Yes. A knockdown rebuild follows the same progressive drawdown structure. The difference is the valuation, which is done on an as-if-complete basis while the existing dwelling is still standing, and the demolition stage sitting ahead of the slab.

Written by Shane Heness

Owner and mortgage broker at LoanBuddy, Parramatta NSW. Eight years as a mortgage broker and a property investor since 2015. Credit Representative #528658 under Australian Credit Licence #389328.