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Progress payments and off-site construction — why the standard stages don't fit
| Standard build stages | Deposit → base → frame → lock-up → fixing → completion[1][2] |
|---|---|
| NSW deposit cap | 5% of contract value on contracts over $20,000[3] |
| What a lender normally inspects | Physical progress on the land, by a valuer[4] |
| The modular problem | Most contract value is created in a factory, off the land[4][5] |
| CommBank modular policy | Up to 80% of contract price released during factory build, for assessed manufacturers[6][7] |
| Bankwest (WA) policy | A third payment stage of up to 95% of land value[8] |
| *Lender-specific figures are drawn from broker and builder marketing material. Confirm current terms with the lender directly. | |
A construction loan is built around a simple assumption: the bank can see the work. A valuer visits the block, confirms the slab is down or the frame is up, and releases the next tranche of money. That assumption holds for a site-built house. It does not hold for a home whose most expensive stage happens in a factory, on someone else's premises, with nothing yet on your land to inspect.
This is the single biggest practical friction point in financing an off-site build, and it is worth understanding both halves of it — how the standard system works, and how lenders have started to adapt it — before you sign a building contract.
How the standard system works §
Australian residential building contracts release payment in stages tied to physical progress, and in the two largest states this is not just industry custom — it is set out in legislation.
In Victoria, the Domestic Building Contracts Act 1995 prescribes the progress stages under what the industry calls Method 1: a claim for payment can only be made once all the work under a relevant stage has actually been completed, and the Act also caps the deposit that can be taken up front.[1] In NSW, the Home Building Act 1989 and Home Building Regulation 2014 cap the deposit at 5% of contract value for contracts over $20,000 — reduced from 10% before 2025 — and any contract clause that contradicts these limits is void to that extent, meaning a builder cannot enforce it even if the owner signed it.[3]
The stages themselves are broadly consistent across states and standard-form contracts such as the HIA New Home Construction Contract:[1][2]
| Stage | What it represents | Typical NSW share |
|---|---|---|
| Deposit | Paid at contract signing | 5%[3] |
| Base | Slab or footings poured and cured | 15%[3] |
| Frame | Frame complete, roof on | 20%[3] |
| Lock-up | External walls, doors and windows secure | 25%[3] |
| Fixing | Internal linings, cabinetry, fit-off rough-in | 20%[3] |
| Practical completion | Handover | 15%[3] |
Note: percentages are typical figures for NSW and will differ by state and contract; treat this as illustrative, not a template for your build. Each of these stages is defined so that a claim can only be issued once the physical work is genuinely done — the base stage claim requires the slab to actually be poured and cured, not merely started.[3]
The whole structure depends on one thing: a valuer or building surveyor can drive to the block and see what has been completed.[4]
Where modular construction breaks it §
An off-site build inverts the usual sequence. The largest and most expensive stage — manufacturing the modules — happens in a factory, sometimes hundreds of kilometres from your land, and produces nothing a lender's valuer can inspect on site.[5] Meanwhile the on-site work that a standard contract is built around — footings, connections, final fit-off — may represent a comparatively small share of the total contract value.
Historically this left buyers with two bad options: self-fund a large factory-stage payment out of pocket before any bank money was available, or ask the builder to carry the manufacturing cost until the modules reached the site — something many builders cannot or will not do, leading to delays or cancelled projects.[5] Published guidance describes the default fallback position at many lenders as a two-stage structure: deposit, then completion — with the entire manufacturing phase unfunded by the loan in between.[8]
Traditional construction loans require on-site inspections to verify progress before releasing funds. For modular builds, the most expensive phase of construction — factory manufacture — produces nothing the lender can inspect on the land.
How lenders have adapted §
The gap has started to close, unevenly, over the past two years.
Commonwealth Bank introduced modular-specific construction loans in 2025 that can release funds against factory-stage milestones rather than waiting for the home to reach the block. For builders on CBA's list of assessed manufacturers, published guidance describes access to up to 80% of the build contract price during off-site construction; for manufacturers not on that assessed list, the figure drops to around 60% of the contract price, or 120% of land equity, whichever is lower.[6][7] This "assessed manufacturer" status is a CBA-specific classification — ask your builder directly whether they hold it, since the financing pathway differs materially depending on the answer.
Bankwest has taken a different approach for Western Australian buyers, adding a third payment stage to its standard construction loan structure that can authorise a payment of up to 95% of land value to support cash flow during the build.[8]
Beyond those two, published guidance is consistent that "most other lenders" still only begin drawdowns once the home is physically on-site,[9] and that a standard (non-construction) home loan is sometimes used instead where the builder self-funds the factory stage and the home is delivered complete before settlement.[9]
What this means for comparing builders and lenders §
Because finance structure varies this much between lenders, and because it interacts directly with which builders can realistically work with which banks, resolving finance is not a late-stage administrative task on an off-site build — it can determine which builders are practical for you at all.
- Ask your prospective builder which lenders they have worked with before, and whether any lender classifies them as an assessed or approved manufacturer.
- Ask the lender directly what stages of an off-site build they will fund, and what evidence they require for a factory-stage drawdown (a builder's certification, a factory inspection, photographs).
- If the lender will only fund on-site stages, ask the builder in writing how the factory-stage cost is expected to be covered in the meantime, and get that answer into the contract.
- Compare the total percentage available before installation across lenders — this figure varies enormously and is the single number that most affects your cash-flow exposure during the build.
Lending policy in this space is changing quickly and unevenly between institutions. Treat every lender-specific figure on this page as a starting point for a conversation, not a current quote — confirm directly with the lender or a broker before relying on it.
Related guides §
- Financing a modular home in Australia
- Price rises and variations in modular contracts
- Can you get a mortgage on a modular home?
- Building insurance and warranty schemes by state
- Glossary
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References §
- HIA — Progress payments for residential building work in Victoria — Method 1 uses the prescribed progress stages required by section 40 of the Domestic Building Contracts Act 1995 (Vic). A claim for payment can only be made once all the work under a relevant progress payment stage has been completed. The Act also sets limits on the amount of a deposit that can be taken. hia.com.au/resources-and-advice/managing-your-business/dealing-with-contracts/articles/progress-payments-for-residential-building-work-in-victoria
- Esprit Constructions (Mackay builder), describing the HIA New Home Construction Contract — There are six stages invoiced for a build: initial deposit, Base stage, Frame stage, Enclosed (Lock Up) stage, Fixing stage and Practical Completion, each worth a set percentage of the total contract price proportionate to its value. espritconstructions.com.au/theblog/payment-progress-schedules-explained
- Buildana — Progress Payment Claims under the Home Building Act (NSW), 2026 — Section 8 of the Home Building Act 1989 (NSW), together with the Home Building Regulation 2014, sets the maximum allowable deposit at 5% of contract value for contracts over $20,000, down from 10% pre-2025; any contract clause contradicting these provisions is void to that extent. Typical progress claim stages for a new home: deposit 5%, base stage 15%, frame stage 20%, lock-up stage 25%, fixing stage 20%, practical completion 15%. buildana.com.au/insights/progress-payment-claims-hba-nsw-2026
- Yard Home Loans — prefabricated and modular home loans guide — With a traditional home, payments are made progressively to the builder as each stage is completed, and lenders release funds once on-site progress can be inspected and verified through a valuation. With a prefabricated or modular home, the process works differently because the home is built off-site in a factory before being transported and installed. yard.com.au/resources/post/prefab-home-loans
- SIPS Modular Homes — Financing Your Modular Home in Australia, 2026 — Traditional construction loans require on-site inspections to verify progress before releasing funds. For modular builds, the most expensive phase of construction — factory manufacture — produces nothing the lender can inspect on the land, historically forcing buyers to self-fund large portions of the factory build upfront or ask the builder to carry the cost. sipsmodularhomes.com.au/financing-your-modular-home-in-australia-2026-the-complete-guide/
- SIPS Modular Homes — Financing Your Modular Home in Australia, 2026 — In 2025 Commonwealth Bank introduced modular home loans offering progressive drawdown funding during the off-site factory build stage. For CommBank-assessed manufacturers, up to 80% of the build contract price can be accessed during off-site construction; for non-assessed manufacturers, up to 60% of the build contract price or 120% of land equity, whichever is lower. sipsmodularhomes.com.au/financing-your-modular-home-in-australia-2026-the-complete-guide/
- Wright Choice Homes — modular home finance guide — In 2025 Commonwealth Bank became the first major Australian lender to introduce construction loans with progressive drawdowns for factory-built homes. Building with a CommBank Assessed Manufacturer may allow access to up to 80% of build contract value while the home is still being constructed in the factory, with remaining funds released after installation and connection to essential services. wrightchoicehomes.com.au/blog/modular-home-finance-guide/
- Shore Financial — How to Finance a Modular Home in Australia — Modular homes are often financed with two payment stages — deposit and completion — because a bank valuer cannot inspect off-site construction. Some lenders, including Bankwest, have amended their construction loans to allow a third payment stage; for Bankwest this allows buyers in Western Australia to authorise a third payment of up to 95% of the land value. shorefinancial.com.au/how-to-finance-a-modular-home-in-australia/
- Built by Modify — modular home financing explained, 2026 — For modular projects with a lender such as CBA, drawdown milestones can include factory stages; with most other lenders, drawdowns only begin once the home is on-site. A standard home loan may be used where the modular home is already completed, delivered and fixed to the land before settlement, which is more common when the builder self-funds the factory stage. builtbymodify.com.au/blogs/modular-home-financing
Figures are as published by the sources above at their respective dates and are paraphrased summaries, not verbatim reproductions. Verify current pricing and rules directly with builders, lenders and planning authorities.