Construction Loan Progress Payments and Conveyancing

A construction loan drawn down in progress payments works very differently to a standard home loan, and that difference flows directly into how the conveyancing is structured. Rather than a single lump sum released at settlement, the lender pays the builder in stages as work is completed, which means the legal and financial process around the transaction has to be split into distinct parts rather than treated as one event. Understanding how this staged funding model interacts with contracts, titles and settlement dates helps you avoid confusion once building actually starts.

Two Contracts, Two Timelines

Most house and land purchases involve two separate legal documents: a land contract and a building contract. Your conveyancer's core role sits with the land contract, since that is the document that transfers title and triggers a formal settlement. The building contract, which governs the construction loan progress payments, is generally administered directly between you, the builder and your lender, though your conveyancer needs visibility over both to make sure the overall timeline makes sense. If you are working through a house and land package, this split is worth understanding before you sign anything, because the two contracts do not always run on matching schedules.

Settlement Happens on the Land First

In a typical scenario, settlement occurs on the land component well before construction is complete, sometimes before it has even started. This is when title transfers into your name and your conveyancer finalises the usual searches, adjustments and registration through off-the-plan purchase style processes where relevant, or a standard residential purchase if the land is titled and ready to build on. Once land settlement is complete, the construction loan progress payments then begin flowing to the builder as separate drawdowns, generally tied to defined stages such as base, frame, lock-up and fixing.

Why the Split Matters for Your Conveyancer

Because settlement and construction funding are separated, your conveyancer needs to confirm your finance approval covers the full facility, land plus build, before land settlement proceeds, even though only the land portion is being drawn down at that point. Lenders will not usually release land settlement funds unless the entire construction loan has been approved and the building contract has been assessed, since the security they are relying on is the completed home, not just the vacant block. This is one reason construction loan applications tend to take longer to reach unconditional approval than a straightforward purchase of an established home.

Mortgage Registration During a Build

The mortgage over a construction loan is registered against the title at land settlement, in the same way as any other home loan, even though most of the loan amount has not yet been drawn. This means your title will show a registered mortgage for the full facility limit from an early stage, well before the home exists. Your conveyancer handles this registration as part of land settlement and it does not need to be repeated as each progress payment is released, since the security interest was already established at the outset.

Coordinating Council and Compliance Requirements

Councils and building certifiers sit outside the conveyancing process but still affect its timing indirectly. Delays in obtaining a building permit, changes to approved plans, or a builder needing to renegotiate stages with the lender can all push construction timelines out, which occasionally has knock-on effects for anyone whose own settlement is linked to yours, such as a simultaneous sale. A conveyancer familiar with construction loan transactions will flag these dependencies early rather than assuming a purchase involving a build will run on the same rhythm as a standard sale.

Fixed-Price Versus Cost-Plus Building Contracts

The type of building contract you sign also shapes how progress payments interact with your finance. A fixed-price contract sets out the stages and amounts in advance, which makes it easier for your lender to assess and release each drawdown against a known schedule. A cost-plus arrangement, where the final price can move as the build progresses, tends to require more back-and-forth between the builder, the lender's valuer and you before each payment is approved. This does not directly involve your conveyancer, but it is worth understanding before land settlement, because a cost-plus contract with an open-ended budget can occasionally strain a construction loan facility that was approved against an earlier estimate.

If You Are Selling an Existing Home at the Same Time

Many people building a new home are also selling an existing property to help fund it. Where this applies, your conveyancer needs to understand that the construction timeline, not just the land settlement date, may determine when you actually need access to sale proceeds. Because building can take considerably longer than a standard settlement window, it is common for the sale of an existing home to settle well before the new build reaches completion, which raises separate questions around interim accommodation and where sale proceeds are held in the meantime. Discussing this timing gap with your conveyancer early, alongside your refinancing or lending arrangements, avoids surprises later in the process.

What to Check Before You Commit

Before signing a land contract tied to a construction loan, it is worth confirming with your lender and broker how progress payments will be verified, since most lenders send a valuer to inspect each stage before releasing funds, and any dispute over completed work can delay a drawdown. Reviewing the MoneySmart guide to buying a house alongside your lender's own construction loan documentation is a useful way to understand the general shape of staged lending before your conveyancer walks you through the contract-specific detail. It is also worth asking your conveyancer to check the land contract for sunset clauses and outside completion dates, since these protect you if construction or titling is delayed well beyond what was originally expected. Your conveyancer cannot control how quickly a builder progresses through stages, but they can make sure the land contract itself does not leave you exposed to unnecessary risk while that construction is underway.