How Construction Loan Progress Payments Work in Australia

No, the lender pays your builder directly at each progress payment stage. After your builder submits an invoice for a completed stage, the lender arranges a progress inspection. Once the inspector confirms the work matches the invoice, the lender releases the funds straight to the builder. You don't handle the payment yourself, which protects both you and the lender from paying for incomplete work.

Most lenders release a progress payment within 3 to 7 business days after the builder submits the invoice. The timeline depends on how quickly the lender can arrange and complete the progress inspection. If the inspector flags incomplete work or the invoice doesn't match the approved schedule, the payment can be delayed until the issue is resolved. Some non-bank lenders process drawdowns faster, sometimes within 48 hours.

No, you only pay interest on the amount that has been drawn down so far. For example, if your approved loan is $500,000 and only $150,000 has been drawn for the slab and frame stages, you pay interest on $150,000. Your interest cost increases with each drawdown as the build progresses. This structure keeps your repayments lower in the early stages of construction. For a detailed look at how interest is calculated, see our guide to construction loan interest rates.

Your lender will only release funds at the agreed progress payment stages in your building contract. If your builder requests money outside those stages, the lender will typically refuse. Builders sometimes ask for additional payments to cover variations or unexpected costs, but these need to be documented as formal contract variations and approved by the lender before any extra funds are released. If your builder pressures you for direct payments outside the loan structure, speak with your broker or lender immediately.

A progress inspection is a physical site visit by a qualified valuer or inspector arranged by your lender to confirm that the construction work matches the builder's invoice before funds are released. The cost is typically between $150 and $350 per inspection, and most lenders charge this fee to you. Some lenders include inspection fees in the loan amount, while others deduct them from the drawdown. Over a standard 5 or 6 stage build, total inspection costs usually sit between $750 and $2,100.

Changes to the progress payment schedule after approval are possible but require lender consent. If the build scope changes or your builder negotiates a different stage breakdown, you'll need to submit a formal variation to the lender for assessment. Minor adjustments to percentage splits between stages are usually straightforward. However, adding extra stages or significantly altering the drawdown amounts may trigger a reassessment of the loan. Your construction loan broker can help manage this process with the lender.

Yes, renovation projects typically use a modified stage schedule because the work doesn't follow the same sequence as a new build. A major renovation might skip the slab stage entirely if the existing foundations are retained, and stages may be structured around demolition, structural work, fit-out and completion instead. Lenders are generally flexible on renovation drawdown schedules as long as each stage is clearly defined in the building contract and can be independently inspected. For more detail, see our guide to major renovation loans.

Practical completion is the final progress payment stage, typically representing 10% to 15% of the total contract price. The lender releases this payment after a final inspection confirms the home is complete and fit for occupation. Your builder must provide a certificate of practical completion, and the local council usually needs to issue an occupation certificate. Once the final drawdown is made, your construction loan converts to a standard home loan with principal and interest repayments.