What is a progress payment request?

Drawdowns or construction progress payments is the process of asking your lender to pay your builder for part of the work that has been completed.

Usually, a builder will require five payments to be made, one at each stage of construction.

You and your builder may have already agreed to how many payments will be made, the gap between those payments, their amount and when they are due.

The lender simply makes sure that these payments are made when stipulated.


How can we help?

We’ll get involved with our customers construction loans if there’s a delay with the bank or if there’s a problem that you need our help to resolve.

Apart for those situations, it’s best for you and your builder to deal directly with your lender’s construction department.

Progress payments are routine procedures, so it’s likely that things will run smoothly.

If you’re taking out an owner builder mortgage then the document requirements will be very different and the progress inspection policies of the banks will be more stringent. Please discuss how this will work with your mortgage broker.


Prior to commencement

Before the lender allows you to begin construction, you and your builder will need to provide them with the following documents:

  • Signed building contract.
  • Council approved plans.
  • Construction certificate (NSW) or Building permit (VIC) or Decision notice (QLD).
  • Builders Insurance (certificate of currency).
  • Builders Indemnity / Public Risk Insurance ($5 million minimum for most lenders).

You can either send these to the lender, prior to the first progress payment request or with the first progress payment request.

We recommend that you send these to your bank at least 2 weeks before you intend to start construction in order to give them sufficient time to do their processing.

Have you already given these to the bank as part of your loan application? Give it to them again!

The construction department doesn’t always look through your loan file to find the documents so it’s faster just to give them the documents again.


The first progress payment request

There are often delays with the first progress payment request because in many cases, the above documents haven’t been provided or have been lost by the lender.

These documents may have been supplied during loan approval but the construction department may not have a copy of the file from the credit department that approved your loan.

If you didn’t borrow 100% of the cost of construction, the lender will request that you pay all the funds you’re required to contribute before they release any payment to the builder.


How to request a progress payment

To request a progress payment, you can either speak with your mortgage broker or contact your bank directly.

If you decide to go directly with your bank, you need to fax them the following:

  • A signed progress payment request form (available from your lender) or a signed letter from you authorising payment.
  • A copy of the invoice from your builder.
  • (First progress payment only) A copy of the receipt from the builder showing that you’ve paid them the funds you’re required to contribute.
  • (Final progress payment only) Call the lender to discuss their additional requirements prior to sending them the request.

Want to save a whole heap of time and hassle? Let your mortgage broker handle all of this on your behalf!

We have strong relationships with the key decision-makers at your bank to ensure you receive your progress payments on time and in full so you can keep your builder happy.

All you need to provide us with is a signed letter from you authorising payment and the rest of the above documents and we’ll take care of the rest.

We can even organise for your final progress payments if you give us a call ahead of time.


Your final progress payment request

For your final progress payment request, the lender will usually send a valuer to the property to confirm that work has been completed as per the contract and plans provided.

If there’s any unfinished work, the lender will withhold payment until the work is completed.

You may need to provide additional documents such as:

  • A certificate of occupancy from the council,
  • A copy of your building insurance with enough cover to replace the building. This copy must also include the name of the lender, on the policy, and
  • Other documents as per normal, such as a progress payment request, as well as an invoice from your builder.

Discuss these requirements with your lender prior to requesting the progress payment. You can avoid delays by providing all of the documents up front.


Progress payment request letter template

Use this template if you don’t have the correct progress payment request form from your lender.


Date: 01/01/2017

To ABC Bank Limited

Re: Home Loan Account #: 73312008

We request that you pay the included invoice from our builder John Smith Homes Pty Ltd for the sum of $25,000.


Signed,


Sue Johnston
Mobile: 0404 133 011


Construction department contact details

Note: These contact details are for the customers of Home Loan Experts. If you used another mortgage broker then you may need to deal with a different department within the same lender.

CBA

Ph: 132 407
Fax: 02 8898 3638
Email: LPCNSWFundings@cba.com.au OR tpbpaperlessloan@cba.com.au (must include Bank Reference Number in subject line)

CBA Construction Team

CBA / Colonial
PO BOX 3846
Parramatta NSW 2150

St George

Ph: 02 9952 1280
Fax: 02 9995 8144
Email: progresspayment@stgeorge.com.au

St George Progress Payment Department

St George Bank
Locked Bag 1
Kogarah NSW 1485

Westpac

Ph: 1300 367 483
Fax: (08) 8152 2354
Email: N/A

Westpac Progress Draws Team

The Mortgage Centre Westpac
PO Box 2755
Adelaide SA 5001

ANZ

Ph: 132 599 (Option 1 then option 2)
Fax: 1300 765 247
Email: N/A

ANZ Progress Payments Team

Locked Bag 9
Collins St West Post Office
Melbourne VIC 8007


How to avoid the headaches

If you follow these simple tips, requesting payment from your bank will be a simple, stress-free process:

  • Look at our article to read our top tips for construction loans.
  • Expect the lender to take up to five working days to release each payment.
  • The first and last drawdowns can take up to two weeks, depending on the lender.
  • Send everything to the lender in one go. If they receive the necessary documents in bits and pieces then they’ll get lost or won’t be actioned.
  • Make sure all correspondence that you send to the lender has your contact details, the builder’s contact details and your loan account number.
  • Call the lender 48 hours after sending them any documents to make sure they have received them and have made the payment. Keep following up until the payment is made.
  • If you can’t determine the cost of construction before the loan is approved, think about getting a variable cost / cost plus construction loan.

Good luck with your new home from us at Home Loan Experts! If you wish to speak to someone about getting a construction loan, please call us on 1300 889 743 or complete our free assessment form and we can help you with your situation.

  • Tonie

    Does the bank requires valuation for the payment of each stages of the Progress payment schedule? Also, I want to know how the bank adjust variations in the schedule provided previously to the bank?

  • Hi Tonie,

    Not all banks will require a valuation to be ordered at each state of the drawdown. The process differs based on the various lenders, some might want a valuation at each stage, some at particular stages and some at first and last drawdown.

    Most of the banks are very hesitant to accommodate any variation and it is advised that you have enough funds before making any variation to the schedule.

  • DustyRh

    What construction loan documents will the banks need me to provide to release the first lot of funds to the builder?

  • Hey DustyRh,

    In order to release the first lot of funds to the builder, you’re generally required to provide a signed building contract, a quantity surveyor report (if needed), council-approved plans and evidence of builders insurance.

  • Allen

    I’m researching construction loans as I’ll be applying for one pretty soon. I get progress payments but is there any info on the different levels or stages in the construction process?

  • Hello Allen,

    We have a page on the different stages of construction and how it all works, including when to make each progress payment. There’s even an estimate of how much you may have to pay at each stage. You can check out the stages of construction page through here:
    https://www.homeloanexperts.com.au/home-loan-articles/stages-of-construction/

  • Yvonne

    My friend is paying cash to their builder so just wanted to know if that’s okay with the bank…

  • Hey Yvonne,

    If their builder is being paid cash for their work then no lender will approve a construction loan as they can only approve a loan based on the current value of your property. We recommend that a formal contact is always signed with the builder, ensured that the correct insurances are in place and all relevant state and federal legislation are followed.

  • mim

    I was reading up on this because I want to buy vacant land and build. But problem is that my guarantor’s property is being constructed and will complete in 6 months or so. Do I wait till it’s finished?

  • It can be better to wait because lenders may not be willing to approve the loan because of the incomplete security property of your guarantor. Once the construction is finished, you can then submit the land and construction together. Please feel free to call us and speak with an expert mortgage broker if you’d like to discuss in detail.