What is staged drawdown on a self-build mortgage?

How it works in Ireland

A lender cannot hand over the loan up front because the security for it, the house, does not exist yet. So the letter of offer sets a schedule of stages, typically linked to milestones such as foundations, wall plate, roof, and first fix. When you reach one, you ask for the money. The lender checks the evidence, often a valuer’s inspection and a stage certificate from your architect or engineer, and releases the payment, usually to your solicitor.

The schedule rarely matches your builder’s invoices. A contractor may want a deposit or a payment at the start of a stage, while the lender pays on completion of it. Plan the gap in cash, and use the stage payment planner to see the lowest point your balance reaches. Interest is charged only on the amount drawn, which is why delays cost less in interest than a full loan but still cost money.

In one four-stage example, the minimum final drawdown is 10% of the total mortgage or €15,000, whichever is higher, and the final release needs compliance documents, a final valuation by the same valuer and a Building Energy Rating certificate. Your own offer may differ in the number of stages, their amounts and the papers needed, so read it.

Insurance is a condition. Site insurance usually has to be in place before the first release and kept until completion.

A common mistake

Assuming the first stage covers the foundations. Many lenders release the first payment only when the foundations are complete, so you need cash for the site works first. Ask the lender what the first release requires and when, then add the gap to your budget.