How do progress payments work on a HomeStart construction loan?

When you build rather than buy, your loan does not hand over the full amount at the start. Instead it releases money to your builder in stages as the work gets done, through what are called progress payments or drawdowns. This is the part of building finance that confuses people most, and it has a direct effect on how much interest you pay, so it is worth understanding clearly.

What a progress payment is

A construction loan is built around the reality that the home does not exist yet. As your builder finishes each stage of construction, the lender releases a payment, a drawdown, to pay the builder for that stage. So rather than a single lump sum, your loan is paid out piece by piece, matched to the progress of the build. Each payment moves the money from your loan to your builder once the stage is done.

You only pay interest on what has been drawn

This is the key thing that makes a construction loan different from a normal home loan. You are only charged interest on the amount that has actually been drawn down so far, not on the whole loan. Early in the build, when little has been drawn, your interest is low. As more stages are completed and more is drawn, the interest grows toward the full amount. So your repayments during construction build up gradually alongside the house itself.

How many drawdowns to expect

For a standard build, builders usually require around six progress payments across the construction, tied to milestones such as the base or slab, frame, lockup, fixing and completion. Each drawdown adds to the interest on your loan, because more of the money is now in play. The number of stages is set largely by the builder and the contract.

Why HomeStart partner builds can use fewer

Here is a genuine advantage worth knowing. With a HomeStart house and land package through one of its partner builders, there are often only about three drawdowns instead of six. Fewer drawdowns mean the money is released in larger, later chunks, which can reduce the total interest you pay during construction. For a buyer watching every dollar, that can be a meaningful saving, and it is one of the quiet benefits of the partner builder route.

The drawdown fee

HomeStart charges a fee to process each progress payment. As at 2026, this progressive drawdown fee is 100 dollars per progress payment, which covers the administration of releasing each staged payment on a construction loan. Fewer drawdowns therefore also mean fewer of these fees. As with all fees, confirm the current amount with HomeStart, since fee schedules are updated from time to time.

How each payment is approved

Progress payments are not automatic. As your builder completes each stage, they issue an invoice, you authorise it, and the payment is then released to the builder. The lender may also arrange an inspection or valuation at stages to confirm the work has been done as agreed before releasing funds. This staged sign off protects you, because money is only paid out as real progress is made.

Settlement, insurance and the final payment

A couple of practical points round this out. For a house and land package, settlement on the land can be timed to when planning approval is given and construction is scheduled, which helps keep the interest you pay down. And before the final progress payment is released, the lender will generally need proof that the completed home is insured, so you provide a home insurance certificate with the final drawdown request. These steps are routine, but knowing them avoids last minute scrambles.

Why this matters for your budget

The way progress payments work means your repayments during a build are not flat, they rise as the home is built, and the number of drawdowns affects your total interest. Understanding this lets you budget for the construction period realistically and appreciate why the partner builder route, with fewer drawdowns, can save money. A broker who knows HomeStart construction lending can walk you through the schedule before you commit.