Construction Loans are also different to standard home loans due to the fact that the lenders also having only the security of the land whilst they are asked to fund the end value of land and the construction costs. In order to limit their risk the lenders do partial drawdown of the agreed total loan and pay the builders normally over five stages of the construction as each phase is completed.

Prior to approving the loan, the lender will use the approved plans and contractor specifications to give the property a value when it is completed.
The loan is designed to be paid to the builder as they complete five critical stages of the building works. As each of the five stages is finished, the builder will invoice the owner. The owner will then pass the invoice on to the lender.