Construction Loan Progress Payments: Slab to Completion, Stage by Stage
Every guide lists the 5 stages. Almost none mention that you are running 2 payment schedules at once, one written into your building contract and one written into your loan approval, and that nothing obliges them to agree. That gap is where mid-build cash surprises come from.
The short answer
A residential construction loan releases funds in 5 standard stages: slab, frame, lockup, fixing and completion. At each one the builder issues a progress claim, you pass it to the lender, the lender sends a panel valuer to confirm the work is done, and the lender pays the builder directly. Interest is charged only on the cumulative drawn balance, so the early months cost far less than the late ones. The part most guides omit: your builder is paid on the schedule in the building contract, which state home building law governs, while your lender releases on the schedule in the loan approval, which a valuer governs. Nothing requires the 2 schedules to line up, and you fund the difference.
You are running 2 payment schedules, not 1
The single most useful thing to understand before your first drawdown is that 2 separate documents both claim to say when money moves, they were written by different parties for different purposes, and neither is obliged to match the other.
The first is the building contract. In New South Wales, any residential building contract over $20,000 must contain a progress payment schedule, and NSW Fair Trading is explicit about what that schedule may be based on: progress payments must be for work actually done rather than time on the job, and must match the work carried out. The same law caps the deposit you can be asked for at 10 per cent, and makes it illegal for a builder to take any payment at all, deposit included, before Home Building Compensation cover is in place and a certificate of that cover has been given to you. Every other state has its own equivalent regime. The point is that this schedule is a consumer protection instrument. It exists to stop a builder being paid ahead of the work.
The second is the lender’s construction approval. It sets out the percentage of the loan the lender will release at each named stage, and it conditions every release on a panel valuer attending the site and reporting what proportion of the contract works is genuinely complete. This schedule is a credit risk instrument. It exists to stop the lender being exposed on a half-built asset it may have to sell.
Two schedules, two purposes, one borrower in the middle. NSW Fair Trading’s own guidance on progress payments ends with the tell: check with your lending bank about any special requirements. It says that because the bank has its own schedule and it does not have to be yours.
Your contractual obligation to pay the builder runs on the first schedule. Your access to money runs on the second. When they agree, which is most of the time, none of this is visible and the build feels seamless. When they disagree, and on a 9 to 12 month build with 5 drawdowns they will disagree at least once, the difference is not the builder’s problem and it is not the lender’s problem. It is yours, in cash, usually within the payment terms printed on the builder’s invoice.
Almost everything else on this page is downstream of that one structural fact. It is why a contingency reserve matters more than a better interest rate, why front-loaded builder schedules get pushed back by lenders before approval rather than after, and why the lender’s percentages, not the builder’s, are the ones to plan your cashflow against.
The 5 standard stages and what each represents
Australian residential construction loans almost universally run on a 5 stage structure. The percentage allocated to each stage varies by builder, by contract and by lender, so verify the specific percentages in your own building contract and your own lender approval. The ranges below are typical practice rather than a standard.
Slab, typically 10 to 15 per cent of the contract
Site preparation, excavation, footings, the concrete pour and the slab inspection. This is the first major progress claim, and usually the first time a borrower sees how the drawdown process actually behaves rather than how it was described. What is complete: foundations capable of supporting the frame, signed off by the relevant inspector.
Frame, typically 20 to 25 per cent
Structural framing, wall frames erected, roof trusses installed, floor structure where applicable. The frame stage turns an empty slab into a recognisable building outline. What is complete: the structural skeleton, ready for external cladding and roofing.
Lockup, typically 20 to 25 per cent
External walls clad, roof installed, external doors and windows fitted. Once lockup is achieved the building is weathertight and internal trades can work without weather exposure. This is also the stage most often claimed slightly early, because a build can look finished from the street while a door or a window is still outstanding, and a valuer will notice.
Fixing, typically 20 per cent
Internal plastering, cabinetry installation, plumbing rough-in, electrical rough-in, and fit-off of internal fixtures and fittings. Often the longest stage in elapsed time on a given build, because there is a large amount of trades work to coordinate and inspections at several points. What is complete: the home is functionally ready for finishes.
Completion, typically 15 to 20 per cent
Final painting, tiling, floor finishes, landscaping where contracted, final inspection and the occupation certificate. What is complete: the build is handed over, the certifier has issued the certificate, and the property is legally fit to occupy.
| Stage | Typical % of contract | What is complete | Typical valuation point |
|---|---|---|---|
| Slab | 10 to 15% | Foundations | After slab inspection |
| Frame | 20 to 25% | Structural skeleton | After frame inspection |
| Lockup | 20 to 25% | Building weathertight | After lockup achieved |
| Fixing | About 20% | Ready for finishes | After fit-off complete |
| Completion | 15 to 20% | Handover ready | At occupation certificate |
Builders sometimes propose front-loaded structures, with higher percentages on the early stages. Lenders typically resist this and will push the contract back toward a balanced split before approving, because a front-loaded schedule means the lender is further out of the money at every point in the build than the physical works justify. NSW Fair Trading advises the same thing from the consumer side, that the dollar value placed on each stage should be realistic.
Whatever the contract ends up saying, the lender’s construction approval specifies the percentages it will release at each stage, and those are the percentages that govern the money. Read the approval schedule and the contract schedule side by side before you sign anything. That 10 minutes is the cheapest risk management available on the whole build. Our construction loan service page covers what to bring to that conversation.
What actually happens at each progress payment
Most content on construction loans lists the stages and stops. The harder question is what happens between the builder finishing a stage and the funds arriving, because that sequence is where the elapsed time actually goes.
- The builder completes the stage. Inspections done where required, certifying documents in hand.
- The builder issues a progress claim. An invoice for the percentage allocated to that stage in the building contract.
- You forward the claim to the lender, directly or through your broker to the lender’s construction team. This is the trigger event. Nothing happens at the lender’s end until the invoice arrives, and a claim sitting unopened in an inbox is the single most avoidable delay on this list.
- The lender orders a progress valuation from a panel valuer. The valuer is appointed by the lender. Neither you nor the builder chooses them, and neither of you instructs them.
- The valuer attends site, confirms the work against the contract specification, and reports the proportion of works complete plus anything else the lender should know.
- The lender reviews the report against the conditions on the construction approval: insurance currency, documentation completeness, and no material change in your circumstances.
- The lender releases funds, in most cases directly to the builder, sometimes to a nominated account depending on the lender and the contract structure.
- Interest starts on that drawn amount from the date of the drawdown, added to whatever was drawn before.
Count the handoffs. Three parties, plus a fourth in the valuer, and 4 separate points where a file can sit on someone’s desk. In our experience a clean file moves from invoice to release inside roughly 3 to 10 business days, but that is an observed range on well-prepared applications rather than a service level any lender commits to, and it assumes nothing on the list below goes wrong. Across 5 drawdowns those delays compound, and builders quite reasonably schedule their next trades on the assumption of being paid.
Have your build contract and your loan approval in front of you?
Send us both. We will read the 2 payment schedules against each other and tell you where they diverge, what that gap is worth in cash, and at which stage it is likely to land. Free, and no obligation.
Who pays for the valuations, and the inspection nobody mentions
In most lender setups the borrower pays for each progress valuation as part of the construction loan fee structure. The cost varies by lender, by location and by the stage being valued. Fee structures generally fall into 2 patterns.
Bundled upfront. A single construction loan fee at the start covering all progress valuations across the build. More predictable to budget, and unaffected by how many valuations end up being required.
Per valuation. A separate fee for each valuation, charged as each one is ordered. Cheaper if the build runs to the standard 5 drawdowns, more expensive if variations or re-inspections trigger extra ones.
That distinction is worth resolving before you commit to a construction product rather than after, because it interacts with the variation risk further down this page. Ask your broker for the specific lender’s fee structure in writing.
There is also a second kind of inspection that almost no finance article mentions, because it is not a finance product at all. NSW Fair Trading suggests that on a large project such as a new home, owners consider engaging an independent building consultant or architect to carry out a progress inspection before each payment is made, and puts the cost at $250 to $500 per inspection. This is not the lender’s valuation and it does not replace it. The lender’s valuer works for the lender and reports on the security. An independent consultant works for you and reports on whether the work meets the contract and the applicable standards. On a large build they answer different questions, and only one of them is asking yours.
What slows a progress payment down
Real builds hit delays at predictable points. Four categories account for nearly all of them.
Documentation gaps
Missing detail on the builder’s invoice: no GST breakdown, no clear allocation to the stage, no signature. Insurance certificates not provided, or lapsed during the build. Variations carried out but never documented in writing. These are the most common issues by volume, all of them fixable, and all of them costing days rather than hours.
Valuation timing
Panel valuer availability, particularly in growth corridors where valuers are heavily booked. In Western Sydney’s house-and-land corridors we regularly see a 5 to 10 business day wait for a valuer to attend during peak periods. Report turnaround after the inspection is usually faster, but it is another step, not a formality.
Valuation outcomes
The valuer assesses the work below the percentage claimed. Lockup claimed while external doors are still outstanding is the classic. Undisclosed variations appearing on site, or workmanship issues the lender wants resolved before releasing, produce the same result: a round trip between lender, builder and borrower before anything moves.
Lender-side issues
A change in your circumstances between approval and drawdown, whether income, expenses or new debt. New credit enquiries on your file, including unrelated applications, sometimes trigger a refresh of serviceability. Internal queries from a settlement team. Individually infrequent, but materially disruptive mid-build, and the reason brokers tell construction clients not to finance a car or open a new card until handover.
When the valuation comes in light
The most stressful moment mid-build is a valuation that reports less work complete than the builder has claimed. The lender releases against the valuer’s assessed percentage, not the builder’s claim, and this is the point where the 2 schedules from the top of this page stop being an abstraction.
The mechanics are simple and unwelcome:
- The lender releases the assessed percentage. Say 18 per cent against a 20 per cent claim.
- The builder is still owed what the building contract says for the work the builder has done. That contract is between you and the builder. The lender is not a party to it, so the lender’s view of the work does not change what you owe.
- The shortfall comes from your own funds, from a contingency reserve if one was structured in, or occasionally from the builder agreeing to carry the difference to the next stage. Only 1 of those 3 is something you can arrange in advance.
Which is the entire argument for modelling contingency before the build starts rather than during it. Borrowers who structure a reserve at application tend to have unremarkable builds. Borrowers who do not tend to discover the gap at the frame stage with a builder waiting. For first home buyers and knockdown-rebuild owners working with tighter deposits, the deposit position, the lender’s appetite on loan-to-value ratio and a realistic contingency figure need to be settled together, before the build contract is signed. Our first home buyer guide covers how the schemes and grants interact with a construction purchase.
Variations, and the paperwork that makes them survivable
A variation is any change to the original building contract during the build. Upgrading kitchen finishes, adding powerpoints, expanding landscaping scope, changing a flooring specification. They are normal. What makes them expensive is that they are usually agreed verbally on site and documented late, if at all.
NSW Fair Trading sets out what should happen before work on a variation commences. The builder gives you a written description of the work, any plans or specifications for it, the extra cost, and any extra time required, and both of you sign that notice. The only exception is where there is a likely danger to a person or damage to property and there is no time to put it in writing first, in which case the written variation follows the work. Every state has an equivalent expectation, and the reason for it is the same everywhere: an agreement reached with a site supervisor during a walkthrough is routinely disputed later, and the party without the paperwork loses.
On the finance side, 3 things follow:
- Variations within the contracted total, where money has moved between line items but the contract price has not changed, typically need no lender action. The release percentages still apply to the same total.
- Variations that increase the total need funding from somewhere: a contingency reserve structured at application, your own resources, or a loan increase.
- A loan increase mid-build is possible but slow. The lender reassesses serviceability against your current circumstances, requests updated financials, and may require a fresh valuation. Allow 2 to 4 weeks at minimum, longer in busy periods, and note that this reassessment lands in exactly the situation where you least want it.
In practice the most common mid-build cost surprise is not the light valuation. It is variations the borrower agreed to enthusiastically in month 3 and did not budget for. Building contract interpretation and any dispute about a variation sit with your solicitor and with the state building regulator, not with your broker. A broker can flag a variation problem as it hits the finance, and should, but the contract question is a legal one.
Interest during construction
Two principles cover most of what borrowers get wrong here.
Interest accrues on the cumulative drawn balance, not the approved limit. The loan starts at zero and builds up across the stages, so the cost curve rises through the build:
- After the slab payment, roughly 10 to 15 per cent drawn: interest on that amount only.
- After frame, cumulatively around 30 to 40 per cent drawn.
- After lockup, cumulatively around 50 to 65 per cent.
- After fixing, cumulatively around 70 to 85 per cent.
- After completion, fully drawn, and interest on the whole balance.
The practical effect is that the first few months of a construction loan cost meaningfully less to hold than the last few, and the repayment you see in month 2 tells you very little about the repayment you will see in month 11. Budget against the late number.
Most construction loans are interest only during the build, converting to principal and interest at handover. That treatment recognises that you are funding a build and your living costs at the same time, frequently including rent on somewhere else while the new home goes up. It is a deliberate cashflow accommodation for a defined period, not a permanent feature of the loan, and treating it as the normal cost of the property is how people get caught at conversion.
When the loan converts to a standard home loan
Two things have to happen together.
The occupation certificate is issued. This is a state instrument, not a national one. In New South Wales it is issued by the appointed principal certifier under Part 6 of the Environmental Planning and Assessment Act 1979, the provisions that commenced on 1 December 2019 and removed the old distinction between interim and final occupation certificates. Other states issue an equivalent certificate under their own legislation with their own name for it. The Australian Building Codes Board produces the National Construction Code that the building work is built to, but it does not issue or administer these certificates, and if a lender or builder tells you otherwise, the document you need still comes from the certifier.
The final progress payment is released. The completion drawdown has gone to the builder and the loan is fully drawn.
Once both have happened the lender moves the loan from the construction product to a standard home loan. Repayments shift from interest only to principal and interest unless you have separately applied for an interest only product. The repayment amount rises, often materially, because you are now paying down principal as well as interest on a balance higher than it was through most of the build. The loan then behaves like any other: rates apply, redraw or offset features become available where the product has them, and refinancing becomes possible.
Model the converted principal and interest repayment at application, not at conversion. Most brokers run that number as a matter of course. If yours has not, ask, because it is the repayment you will actually live with for the next 25 or 30 years, and the interest only figure you have been paying through the build is not it. Whether the original lender remains the right fit after conversion is a separate question worth revisiting after the first 12 to 18 months. Most house-and-land buyers apply jointly, and our guide to joint home loans for couples covers how the loan and title combinations interact with a build.
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Frequently Asked
Construction Progress Payment FAQs
What borrowers ask most often once the build is underway.
What are the 5 stages of a construction loan in Australia?
Slab, being the foundations. Frame, the structural framing. Lockup, once external walls, roof, doors and windows are in and the building is weathertight. Fixing, covering internal plastering, cabinetry and plumbing and electrical fit-off. Completion, covering final finishes and the occupation certificate. The percentage allocated to each varies by builder, contract and lender, so verify the figures in your own building contract and lender approval rather than relying on typical ranges.
Why does my builder’s payment schedule differ from my lender’s?
Because they are 2 different documents written for 2 different purposes. The builder’s schedule sits in the building contract and is governed by state home building law, which requires payments to be for work actually done. The lender’s schedule sits in the loan approval and is governed by a panel valuer’s assessment of the security. Nothing requires them to match. Where they diverge, the borrower funds the difference, which is why the 2 should be read side by side before the contract is signed.
Who orders the valuation between progress payments?
The lender does, from its own panel, after your builder’s progress claim reaches it. Neither you nor the builder selects the valuer or instructs them, and no broker can influence the outcome. The valuer’s job is to confirm to the lender what proportion of the contracted works is genuinely complete.
Who pays for the progress valuations?
The borrower, in most lender setups. Some lenders bundle all progress valuations into a single construction loan fee charged upfront, others charge separately for each valuation as it is ordered. The second structure costs more if variations or re-inspections trigger extra valuations. Ask for the specific structure in writing before committing to a construction product.
How is interest calculated on a construction loan?
On the cumulative drawn balance, not the approved limit. After the slab drawdown you pay interest on the slab amount only. After the frame drawdown, on slab plus frame, and so on until the loan is fully drawn at completion. Most construction loans are interest only during the build and convert to principal and interest at handover.
What happens if the progress valuation comes in below the builder’s claim?
The lender releases against the valuer’s assessed percentage rather than the claim. Your building contract is with the builder, not the lender, so the lender’s view does not reduce what you owe. The shortfall comes from your own funds, from a contingency reserve if one was structured into the loan at application, or occasionally from the builder agreeing to carry it to the next stage. Only the contingency reserve is something you can arrange in advance.
How long does each progress payment take to come through?
On a clean, well-documented file we typically see roughly 3 to 10 business days from the invoice reaching the lender to funds being released. That is an observed range rather than any lender’s service level. Valuer availability is the usual variable, and in busy growth corridors a 5 to 10 business day wait for a site attendance alone is common.
How much deposit can a builder ask for before work starts?
In New South Wales, home building law caps the deposit at 10 per cent of the contract price. It is also illegal for a contractor to ask for a deposit or any other payment on work covered by the Home Building Compensation Scheme unless that cover has been taken out and a certificate of it given to you. Cover is generally required on residential building work over $20,000 including GST. Other states have their own caps and schemes, so check the rules that apply where you are building.
What counts as a variation, and how should it be documented?
Any change to the original building contract, most often an upgrade or addition requested during the build. Before work on it starts, the builder should give you a written description of the work, any plans or specifications, the extra cost and any extra time required, and you should both sign it. The narrow exception is where there is a likely danger to a person or damage to property and no time to document first. A variation agreed verbally on site is the version most often disputed later.
Should I get my own inspection before each payment?
On a full new home build it is worth considering. NSW Fair Trading suggests owners may engage an independent building consultant or architect to inspect before each payment, at an indicative $250 to $500 per inspection. This is separate from the lender’s progress valuation and does not replace it. The lender’s valuer reports to the lender on its security. An independent consultant reports to you on whether the work meets the contract and the applicable standards.
When does my construction loan become a normal home loan?
When the occupation certificate has been issued by the certifier and the final completion drawdown has been released. At that point the lender moves the loan onto a standard home loan product, repayments shift from interest only to principal and interest unless you have applied for something else, and the repayment amount usually rises noticeably.
Can I move in before the completion drawdown?
Generally no. Occupation is tied to the certificate, which is issued at the end of the build, and the final drawdown is tied to completion of the works. Moving in early can also affect insurance and the builder’s obligations under the contract. If your circumstances make the timing difficult, raise it with the builder and the certifier before making any arrangements, not after.
The bottom line
The 5 stage structure is the easy part, and it is the part every article covers. The part that actually costs people money is that a construction loan runs 2 payment schedules simultaneously, written by different parties under different rules, with a borrower personally liable on one and dependent on the other.
So the useful preparation is not memorising the stages. It is reading the builder’s schedule and the lender’s approval schedule against each other before either is signed, working out where they diverge and what that gap is worth in cash, and structuring a contingency reserve that covers it. Do that and a light valuation at frame stage is an administrative annoyance. Skip it and the same event is a scramble.
Everything else follows the same logic. Document variations in writing before the work starts, because the undocumented ones are the ones that are disputed. Model the converted principal and interest repayment at application, because that is the number you live with. Do not open new credit mid-build. And send the progress claim to the lender the day it arrives, because that single email is the only part of the release sequence you fully control.
Joseph Sukkar
Joseph has worked in Australian finance for more than 25 years and has run Intellect Finance from Penrith since 2005, structuring construction loans across first home buyer house-and-land builds, knockdown rebuilds and investor-built new dwellings through several cycles of the construction lending market. Residential construction and new estate lending at Intellect Finance is led by Moufid, Head of Residential, who runs day-to-day construction files across the Western Sydney growth corridor including Marsden Park, Schofields, Box Hill, Catherine Field and Leppington. Intellect Finance charges clients no fee on any loan type. More about the team.
Sources
NSW Government, Building Commission NSW, Contracts for residential building work, last updated 29 April 2026, for the written contract thresholds, the requirement that progress payments be for work actually done rather than time on the job, the requirement that contracts over $20,000 carry a progress payment schedule, the 10 per cent deposit cap, the variation documentation requirements, the statutory warranty periods, and the indicative $250 to $500 cost of an independent progress inspection. nsw.gov.au
icare NSW, Do I need HBCF, for the requirement that Home Building Compensation cover be in place on most residential building work over $20,000 including GST before work starts or any payment including a deposit is taken, and that evidence of cover be given to the homeowner. icare.nsw.gov.au
NSW Department of Planning, Housing and Infrastructure, Building and subdivision, for Part 6 of the Environmental Planning and Assessment Act 1979 commencing 1 December 2019, the removal of interim and final occupation certificates, and the principal certifier’s role in issuing the occupation certificate. planning.nsw.gov.au
Important disclosures, general advice warning and licensing
General information only. This article is general information only and does not constitute financial, credit, legal or tax advice. It does not take your personal or financial circumstances into account. Before acting on any information here, consider whether it is appropriate to your objectives, financial situation and needs.
Building law is state law. The home building rules described on this page, including contract thresholds, the deposit cap, progress payment requirements, variation documentation, statutory warranties and compensation scheme cover, are New South Wales requirements sourced from Building Commission NSW and icare NSW as at the dates stated. Every other state and territory has its own regime with different thresholds and different names for the same instruments. If you are building outside New South Wales, check the rules that apply where you are building.
Not legal advice on your building contract. Interpretation of a building contract, any dispute about a progress claim or a variation, and any question about your rights against a builder are legal matters for your solicitor and for the relevant state building regulator. A broker can identify where a contract issue affects the finance and should raise it, but cannot advise on the contract itself.
Stage percentages are illustrative. Every percentage on this page is a typical industry range, not a standard, not any lender’s schedule and not any builder’s schedule. The percentages that govern your drawdowns are those written into your own building contract and your own lender’s construction approval, and where the 2 differ, the approval governs what is released.
Timeframes are illustrative. Every duration on this page is a typical observed range from our own files, not a promise, not a commitment and not any lender’s stated service level. Valuation scheduling, credit turnaround and settlement timing are controlled by the lender and by third parties and vary by lender, product, location and period.
Valuations. The lender instructs every progress valuation for its own purposes and releases against the valuer’s assessed percentage of completion. No broker can influence, guarantee or predict a valuation outcome, and no borrower or builder selects or instructs the valuer.
Fees and costs. Construction loan fee structures, progress valuation fees and independent inspection costs vary by lender, provider, property and location. Any figure quoted here is indicative of the source cited at the date stated rather than a quote, and is not a fee charged by Intellect Finance.
Lender policy varies and changes. Descriptions of common practice are general observations, not any lender’s policy. This page publishes no interest rates and names no lenders. No broker can guarantee approval, pricing, a valuation outcome or a timeframe.
Best Interests Duty. A home loan for a property you will live in is regulated consumer credit under the National Consumer Credit Protection Act 2009, and Best Interests Duty applies.
What we charge you. Nothing, on any loan type. No arrangement fee for residential, commercial, corporate, asset, SMSF or personal lending, no fee for complex or specialist lending, and no clawback recovery fee if a loan is discharged early. Lenders pay us a commission on settlement, disclosed to you in writing in our Credit Guide before we provide credit assistance.
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Intellect Finance Pty Ltd holds Australian Credit Licence 390611 and is a member of the MFAA and AFCA. Lending criteria, fees and terms apply. Article checked 10 September 2026.
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