How progress payments work

Progress payments let you plan and budget to build your dream home.

Think of progress payments as the key difference between your building loan and a regular home loan. Instead of the lumpsum that you would associate with a typical home loan, building loans are paid out in stages, as the construction work progresses, which is why they're called 'progress payments'.

A progress payment is a request by you to the bank to pay out a portion of your loan, so that you can pay your builder for work as construction progresses. It means you need less working capital for your build as you pay your builder and contractors in instalments, when different stages of work are completed, rather than having to budget for a single lumpsum at the end once the project is completed.

The number of progress payments are agreed before you start building. For example, foundation, window height, roof, etc. The number of progress payments typically ranges between four and six, depending on the scope and complexity of your build. Be sure to inform your builder beforehand of the bank conditions.

You authorise the progress payments, but they are made by your bank, so you will give the instruction for a progress payment to be made each time. There is no agreement between your builder and your bank - payments will always be made to you.

When you need to pay your builder, you fill in a payment progress form from the bank that granted your building loan. They will then assign a valuer to inspect the building work that has been completed. If sufficient work has been done to satisfy the bank's requirements for that stage of the project, the funds will be released.

If you've paid a deposit as part of your building loan agreement, the deposit will be used first, and then progress payments can be requested. To protect yourself, banks advise that you never request more than one progress payment at a time, nor should you ever sign any blank progress payment forms for your builder. Remember, ultimately it is your responsibility to verify that the work has been done satisfactorily, so always check the quality of the building before making progress payments.

The final progress payment is made once you are able to supply the bank with an Occupation Certificate, which you will get from your local municipality. The only step then left in the process, is to enjoy your beautiful new home.