Progressive ideas
Progressive payments vs turnkey: Dean McGuigan of Golden Homes on what new home build customers need to know.
Choosing how to fund your new build is one of the biggest decisions you’ll make. Banks usually offer two options: a progressive (construction) loan or a turnkey contract. While turnkey builds may seem easier at first, progressive payments often provide better long-term value. Understanding the difference between these two could save you thousands of dollars.
With a progressive payment loan, the bank releases funds to the builder in stages as work is completed. You only pay interest on the money that’s been drawn down, keeping costs lower during the build. Many first home buyers are surprised at how manageable this can be, especially compared to the extra cost built into turnkey pricing.
Progressive builds also offer greater transparency. Each stage of construction is inspected by your lender before the next payment is released, giving you confidence that work is progressing correctly and on schedule. This reduces risk and ensures your investment is being protected throughout the build.
Another advantage is flexibility. Progressive contracts typically allow you to adjust materials, layouts or finishes as your home takes shape. Turnkey contracts, in contrast, are usually fixed, with strict limitations on design changes or colour choices. For buyers who want a home that reflects their style rather than a standard package, progressive builds provide much greater freedom.
Cost is another key difference. Turnkey contracts often include a $30,000 to $50,000 premium on top of the house-and-land package to cover the builder’s risk. Builders usually fund the full cost of the build themselves until the final payment, often using commercial loans at higher interest rates than standard mortgages. Because the builder carries this financial burden, the buyer indirectly assumes more risk
if anything goes wrong before handover. Essentially, the builder remains the owner until the full payment is made, adding potential exposure for the buyer.
By contrast, progressive payments reduce this risk. Staged drawdowns ease the builder’s cash flow, keeping the project on track. Over the course of a build, paying interest as funds are used is often significantly less expensive than the upfront premium in a turnkey package – potentially saving first home buyers thousands.
Turnkey contracts can still suit buyers who cannot manage rent and progressive payment draws simultaneously: a small deposit is paid up front, and the balance is due only upon completion of the home. However, this convenience comes at a premium and carries additional financial risk, especially if using a smaller builder or building company.
For many first home buyers, progressive payments offer better value, more control, greater transparency, and a more secure building process overall. It’s worth discussing both options with your broker, bank or lender. Don’t assume a turnkey loan is your only choice. Many buyers can qualify for a progressive payment loan, which could save thousands over the course of their build.
