Progress Payments (Drawdowns) Explained: What Happens at Each Stage

Progress payments are the mechanism by which construction loan funds are released to your builder. Understanding how they work helps you plan cash flow, avoid disputes, and keep your build on track.

Who controls the drawdown process?

The drawdown process involves three parties:

• You (the borrower) — You authorise each draw request after confirming the work is complete
• Your builder — Submits progress claims and invoices to you
• Your lender — Releases funds only after inspection confirms the stage is complete

The money never goes directly to you — it goes from the lender to the builder’s nominated account.

The standard drawdown process (step by step)

1. Builder completes a stage and submits a progress claim to you
2. You (or your broker) contact the lender to request an inspection
3. Lender arranges a valuation/progress inspection (usually within 5–10 business days)
4. Inspector visits the site and confirms the stage is complete per the contract
5. Lender approves the draw and transfers funds to the builder
6. Builder invoices you and you authorise payment from the construction loan

How long does each drawdown take?

Allow 7–14 business days from the builder submitting a claim to funds being received. Delays can occur if:

• The inspection reveals incomplete work
• There’s a dispute about contract variations
• The lender has a backlog (common in peak building periods)

Your builder cannot legally withhold work pending payment if the delay is the lender’s. However, most experienced builders understand the process and factor inspection lead times into their scheduling.

Can the bank refuse a drawdown?

Yes. Inspectors can decline to release payment if:

• Work is not at the required completion level for that stage
• There are visible defects or safety issues
• The work doesn’t match the approved plans

If refused, your builder must rectify the issues before re-requesting. This can cause build delays and tension — choose a builder with a track record of passing inspections.

What the inspector checks at each stage

Stage 1 (Slab/Base): Slab poured and cured to spec, drainage laid, damp proof course in place, steel reinforcement visible in engineering documentation.

Stage 2 (Frame): Frame complete and straight, roof rafters/trusses in place, bracing and tie-downs to code, frame inspection by council (if required in your state).

Stage 3 (Lock-Up): External cladding/brick, roof covering, windows and external doors installed and weatherproof. Inspector checks the home is weathertight.

Stage 4 (Fixing): Internal walls lined, cabinetry, tiling, most plumbing and electrical complete. Inspector checks substantial completion of fit-out items listed in the contract.

Stage 5 (Completion): All items in the contract are complete. Practical completion certificate issued by builder. Lender releases final payment only when occupation certificate is available (varies by state).

Contract variations and how they affect drawdowns

Variations are changes to the original contract scope — adding a room, upgrading finishes, changing fixtures. They’re common and legitimate, but they must be:

• Documented in writing with a price before work starts
• Signed by both you and the builder
• Submitted to the lender if the variation increases the total contract price

Important: If variations increase the loan amount beyond the original approval, you may need to re-apply for the additional funds. Check with your broker before approving large variations.

The deposit draw (before Stage 1)

Most builders require a deposit draw of 5% of the build cost at contract signing — before any work starts. This covers the builder’s pre-construction costs (council fees, architectural plans, engineering).

Your lender will release this deposit once:

• The building contract is signed
• Council approvals are in place
• The land has settled (some lenders require this)

The deposit draw does not trigger an inspection — it’s released on contract documentation alone.

Retained amount (final 5%)

Some lenders retain 5% of the final drawdown as a “defects retention.” This is held for 30–90 days after practical completion while you inspect for defects. If defects are found and not rectified, you can direct the withheld funds toward rectification costs.

Not all lenders have this policy — check with your broker.

Use the Interest During Build calculator to see how your interest-only payments build up across all 5 stages.

General advice only. Drawdown processes vary by lender and state. Your building contract governs the specific terms of each stage payment. Verify with your lender and conveyancer.