Quick summary
A construction loan releases money to your builder in stages as work is completed: base or slab, frame, lock-up, fixing and completion. Each draw is usually triggered by a builder's invoice that you sign, and some lenders add inspections or valuations. Lenders vary on the details, so confirm the process with your provider.
How Construction Loan Progress Payments Actually Get Paid
Construction loan progress payments follow the build. Many contracts group the early draws as slab frame lockup payments (base, frame and lock-up), followed by fixing and practical completion. These construction loan stages are set out in your building contract and in the lender's own drawdown schedule, so check both before you sign.
With a standard home loan, the lender sends the full amount to the seller on settlement day. A construction loan works differently. The money is released to your builder in instalments, called progress payments or draws, as each defined stage of the build is finished. Your builder does the work, then issues a tax invoice for that stage. Once the lender has what it needs, it pays the builder directly.
The detail that surprises many owners is who is in the middle of the process. You, the borrower, are usually asked to approve each invoice before it is paid. Lenders commonly require the invoice to be signed by you with an authority for payment, which means you are confirming the stage is done and you are happy with the work. If something looks wrong on site, raise it with your builder before you sign, not after the money has moved.
Timing matters too. Lenders work in business days, not hours, and a draw that needs a physical inspection normally takes longer than one that does not. Builders on tight schedules often ask for payment within days of invoicing, so it pays to know your lender's turnaround before the build starts. This guide walks through each stage in order and explains what usually triggers the draw. If you want the wider picture first, our plain-English guide to how construction loans work covers the mechanics behind the numbers.
Before Any Draw: The Deposit and the Paperwork
The first step sits just before the first stage. Your building contract will usually call for a deposit, and in NSW there are rules about how large that deposit can be and how progress payments must be structured in a residential building contract. The specific limits are set by NSW law, so check the current figures with the NSW Government building and renovating guidance or Building Commission NSW rather than relying on a number you read on a blog.
Whether the deposit comes from your own savings or from the loan depends on the lender and the structure of your facility. Some lenders expect the deposit to be paid from your own funds before the first draw; others will reimburse it through the first payment when you provide proof. This is a real point of difference between lenders, and it changes how much cash you need on hand at the start, so ask before you commit.
What lenders commonly ask for before the first payment
- The signed building contract, including the payment schedule
- Council-approved or certified plans and specifications
- Home building compensation cover (home warranty insurance) certificate for the job, where required
- Contract works insurance and public liability insurance held by the builder
- The builder's first tax invoice, signed by you
Lenders vary on the exact list and the minimum insurance amounts they accept, so treat the list above as a starting checklist, not a guarantee. Your broker will confirm the list for the lender that suits your build.
Stage 1: Base or Slab
The first construction stage is the base. For a slab-on-ground home, that means the site has been cleared and levelled, footings excavated, plumbing and drainage laid, reinforcement fixed and the concrete slab poured and cured. For a home on piers or a sloping block, the base stage looks different but plays the same role: the structure is ready to receive the frame.
What triggers the draw: your builder finishes the base and issues a tax invoice for that stage. Because this is a foundation payment, some lenders order an inspection or valuation at this point, since a mistake here is expensive to fix later. Others only send a valuer at the end. Lenders vary, so do not assume the slab payment will be waved through on the invoice alone.
If your loan has an initial draw before the base, such as for site costs or a deposit reimbursement, it usually comes first and is set out in your contract schedule.
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Stage 2: Frame
At frame stage the skeleton of the house is up. Timber or steel wall frames, roof trusses and floor joists are in place and, depending on the contract, the roof structure is complete. This is where the house starts to look like a house, and it is also where many owners first see whether the build matches their plans.
What triggers the draw: the builder invoices for the frame stage and you sign the invoice. Some lenders do not need a new inspection at this point and pay on the signed invoice alone, while others order a progress inspection at every stage, particularly on larger contract values. The lender's own credit policy decides this, not your builder.
A practical tip: check the frame against your plans before you sign. Moving a wall is cheap now and costly after lining goes on. If your build has variations, such as an extra window or a changed layout, make sure they are documented in writing, because a variation that is not in the contract can hold up a draw or push your total above what the lender approved.
Stage 3: Lock-Up
Lock-up is the point where the house can be secured. External cladding or brickwork is up, the roof is on, and windows and external doors are fitted. The shell is weatherproof, which is why this stage often carries a bigger slice of the contract price than the ones before it.
What triggers the draw: the builder issues the lock-up invoice, you approve it, and the lender pays. Because the lock-up payment can be one of the larger instalments, some lenders take a closer look here. It is worth confirming with your broker whether your lender will inspect, and how many business days the process adds.
Cash flow tip: if your builder is finishing lock-up ahead of schedule, tell your broker early so the paperwork is ready and the builder is not left waiting on payment.
Stage 4: Fixing
Fixing, sometimes called fit-out or internal lining, is the interior stage. Plasterboard is hung and set, internal doors and trims are fitted, cabinetry and benchtops go in, wet areas are waterproofed and tiled, and internal painting begins. It is a busy stage with many trades on site.
What triggers the draw: as with the earlier stages, the trigger is the builder's invoice for the completed work, signed by you. The payment is made against the contract schedule, so the amount is decided by what your contract says, not by the lender's estimate of how much is left.
This is also the stage where cost overruns tend to show up. Allowances for tiles, fixtures and appliances are common areas where actual choices exceed the contract allowance. If you know your selections will run over, tell your broker before the fixing draw, because a lender cannot simply pay more than the approved loan amount without a formal review.
Stage 5: Practical Completion and the Final Draw
The last payment is made at practical completion. The builder has finished the works to the contract, external works such as driveways and fencing are done if they are part of the contract, and the required certificates are ready. In NSW, the occupation certificate is issued by the certifier, and lenders commonly ask to see it.
What triggers the draw: the builder's final invoice, plus a final inspection and, for some lenders, a valuation to confirm the home has been completed in line with the original plans. Lenders also commonly ask for a home and contents or landlord insurance certificate showing the completed property is insured before they release the last payment. Your lender may name itself as an interested party on the policy, so ask which certificates are needed and get them organised before the builder finishes.
Once the final draw is paid, the loan generally moves to the ongoing repayment arrangement set out in your loan terms. Our guide to how construction loans work explains what changes at that point.
Construction Loan Stages at a Glance: The Five Draws
| Stage | Work complete | Common trigger for payment |
|---|---|---|
| Base or slab | Footings and slab poured | Signed invoice; some lenders inspect |
| Frame | Structure and roof frame up | Signed invoice; inspection varies |
| Lock-up | Roof, external walls, windows, doors | Signed invoice; inspection varies |
| Fixing | Internal lining, cabinetry, tiling | Signed invoice against contract |
| Completion | Works finished to contract | Final invoice, final inspection, insurance and certificates |
The percentage attached to each stage comes from your building contract, and lenders vary in what split they will accept. One commonly seen schedule puts the largest single share at lock-up and the smallest at completion, but your own contract governs. Have your broker read the schedule before you sign it, because a schedule that front-loads payments too heavily can be a problem for a lender.
What Slows a Draw Down (and How to Avoid It)
- Unsigned or incomplete invoices. A missing signature or a missing insurance certificate is one of the simplest reasons a payment stalls.
- Inspection lead times. If an inspection is needed, build that time into your builder's expectations.
- Variations not in writing. Changes to the contract can affect the amount the lender is prepared to release.
- Costs above the approved amount. If the price rises, you may need to fund the difference or ask for a review. Read about your options in our guide to construction cost overrun loans.
- Time limits. Construction loans commonly carry a maximum construction period, and lenders vary on the length and on extensions.
Owner-builders face a different process, because there is no builder invoice in the usual sense. See our owner-builder loans guide if that is your situation. Self-employed borrowers should also read our page on self-employed construction loans, and first home buyers can look at first home buyer construction loans in NSW. To model how interest and repayments could look across a build, use our Sydney home loan calculators.
Frequently Asked Questions
Who signs off construction loan progress payments at each stage?
Lenders commonly require the builder's tax invoice to be signed by you, the borrower, to confirm the stage is complete and to authorise payment. The exact requirement varies by lender, so confirm the process with your chosen provider.
Does every progress payment need an inspection?
Not necessarily. Some lenders order an inspection or valuation at certain stages, such as the base and completion, and others at each stage depending on the contract value. Lenders vary, so ask before you commit to a build.
How long does a progress payment take?
Lenders generally process draws in business days rather than hours, and a draw that needs an inspection normally takes longer. Ask your lender for its current turnaround and plan your builder's expectations around it.
Do I pay interest on the whole loan during construction?
Lenders commonly charge interest on the amount drawn so far, not on the full approved limit, but the terms depend on your loan. Confirm how interest is charged with your provider.
What happens if my builder wants a payment that is not in the schedule?
A payment outside the contract schedule can hold up the draw. Any variation should be agreed in writing and discussed with your broker so the lender can review it.
Can I use my own savings for the deposit?
Many building contracts require a deposit up front. Some lenders expect it from your own funds and some will reimburse it through the first draw, so it depends on the lender. NSW law also sets limits on deposits, so check current rules with Building Commission NSW.
Information checked on 1 October 2026. Policies, documentation requirements and lender processes may change. Confirm the progress payment process, inspection requirements and fees directly with your chosen provider before applying. This information is general in nature and does not take your objectives, financial situation or needs into account. Policies vary by lender and change frequently — confirm current requirements with your chosen provider and seek professional advice.
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