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Construction loan drawdown: the five-stage schedule

Construction loans don’t settle in one lump. They drawdown in stages, matched to the builder’s progress payments, and each drawdown requires inspection and paperwork. Getting the schedule right keeps the build moving; getting it wrong stops the site for weeks.

The standard five-stage schedule

Most Australian lenders follow a version of this:

  1. Base (10-15% of contract): site preparation, footings, slab
  2. Frame (15-20%): timber or steel frame up, roof trusses
  3. Lockup (20-25%): external walls, roof, external doors and windows installed
  4. Fixing (20-25%): internal doors, cabinetry, architraves, tiling, plasterboard
  5. Completion (15-20%): final fit-out, final clean, handover

The deposit (usually 5%) is paid at contract signing and comes from your own funds, not the loan.

What triggers each drawdown

Three things are required: the builder issues a progress claim, the lender’s valuer attends site and confirms the stage is genuinely complete, and you sign a drawdown authority. The valuer step is the bottleneck. In peak construction periods, inspection bookings run 5-10 business days out, which your builder may resent.

Interest during construction

You pay interest only on the portion drawn down, not the whole loan. So in month three, if only the base stage has drawn (say 15%), you pay interest on 15% of the loan, not the full amount. This makes construction interest much cheaper than a fully drawn loan for the first six months.

The three things that stall a drawdown

First, variations. Any change to the contract (upgrade the kitchen, change the tile) requires lender approval before the next stage draws. Surprise variations at the fixing stage are the most common cause of a stalled build.

Second, insurance. Home warranty insurance and construction insurance must be current at every stage. Expiries happen.

Third, builder financials. If the builder is showing signs of stress (a trade walks off, a materials supplier puts them on stop credit), lenders sometimes pause drawdowns until they verify the builder can complete. In the current market, this is happening more often than it used to.

Plan for a 10-month build to take 13-14 months, and budget interest on that basis.