What is a drawdown loan?

By Maria Gil · · 2 min read
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Couple on a computer searching up home loan terms like drawdown

Ever wondered a drawdown means? In simple terms a loan drawdown is the release of funds under an agreement with a lender. 

When it comes to home loans, ‘drawdown loan’ means you are using the money the lender provided to buy the property. Lenders use this term to describe when your loan is actually paid to you, usually on settlement of the property.

On the other hand, with a construction loan, money is drawn down in multiple payments as the builders complete different stages of the construction project.

Accessing your home loan on settlement day

Settlement day typically occurs after you’ve paid your deposit and completed the contract that makes you the new homeowner. On this day your solicitor will arrange with the vendor’s solicitor and communicate with your lender to organise the drawdown of the remaining funds to pay for the property. 

For example, Ana and Kate recently bought their first home for $700,000. After paying their $140,000 deposit and receiving the final contract, Ana and Kate have five weeks until their settlement date. They follow the Mozo how to buy your first home guide and conduct their due diligence of inspecting the property and getting financial approval. Come the official settlement date, Ana and Kate’s lender will draw down the remaining $560,000 to pay the vendor. Then they will become the official homeowners of the new property.

Construction loan and drawing down in stages

How do drawdown loans work for construction loans? Well it uses progressive drawdowns, where you can draw on your construction loan as needed throughout the different phases of construction. A typical construction loan drawdown consists of five to six stages.

Since, you’ll be borrowing money by increments you’ll typically only pay interest on the amount of the loan you’ve drawn down so far.

For example, Amy and Rosa got approved for a $300,000 construction loan but have only drawn down $20,000 so far: they’ll only be charged interest for the $20,000. If later in the construction stages Amy and Rosa draw $30,000 for the next phase of the construction, then they’ll be charged interest on $50,000. It continues that way until the complete loan has been used.

If you find yourself overwhelmed with all the home loans jargon check out Mozo’s Home Loan Glossary where we simplify and define all those fancy home loan terms.

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Last updated 11 October 2025 Important disclosures and comparison rate warning*
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Loan purpose
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  • Promoted

    Discount Fixed Rate

    • Fixed rate
    • Owner occupier
    • Principal & Interest
    • 20% min deposit
    • Cashback
    Interest rate
    4.89 % p.a.
    Fixed 2 years
    Comparison rate
    5.42 % p.a.
    Initial monthly repayment
    $2,651
    Go to site
    • $2,000 cashback for new loans (T&Cs apply)
    • Up to $10,000 extra repayments annually
    • One free residential valuation per application
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    Unloan Variable Home Loan

    • Owner occupier
    • Principal & Interest
    • 20% min deposit
    • Redraw available
    Interest rate
    5.24 % p.a.
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    Initial monthly repayment
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    Lite Variable Home Loan

    • Owner occupier
    • Principal & Interest
    • 20% min deposit
    • Redraw available
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    5.19 % p.a.
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    5.21 % p.a.
    Initial monthly repayment
    $2,742
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  • Fixed Rate Home Loan

    • Fixed rate
    • Owner occupier
    • Principal & Interest
    • 5% min deposit
    Interest rate
    4.65 % p.a.
    Fixed 1 year
    Comparison rate
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    Initial monthly repayment
    $2,578
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    • No ongoing annual fees
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  • Fixed Rate Home Loan

    • Fixed rate
    • Owner occupier
    • Principal & Interest
    • Interest only
    • 20% min deposit
    Interest rate
    4.65 % p.a.
    Fixed 1 year
    Comparison rate
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    Initial monthly repayment
    $2,578
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    • Free extra repayments of up to $25,000 during the fixed rate period.
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  • 2-Year Fixed Simple Home Loan Special

    • Fixed rate
    • Owner occupier
    • Principal & Interest
    • 40% min deposit
    • Refinance only
    • Redraw available
    Interest rate
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    Fixed 2 years
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    Initial monthly repayment
    $2,593
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    • No application, ongoing or monthly fees
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    • Get up to $1,000 towards legal and valuation costs (T&Cs apply)

  • 2-Year Fixed Complete Home Loan Special

    • Fixed rate
    • Owner occupier
    • Principal & Interest
    • 40% min deposit
    • Refinance only
    • Offset available
    • Redraw available
    Interest rate
    4.70 % p.a.
    Fixed 2 years
    Comparison rate
    5.62 % p.a.
    Initial monthly repayment
    $2,593
    Go to site
    • Offset account can help you save on interest
    • Make unlimited extra repayments and access funds with free redraw
    • Get up to $1,000 towards legal and valuation costs (T&Cs apply)

  • Discount Fixed Rate

    • Fixed rate
    • Owner occupier
    • Principal & Interest
    • 20% min deposit
    • Cashback
    Interest rate
    4.89 % p.a.
    Fixed 2 years
    Comparison rate
    5.42 % p.a.
    Initial monthly repayment
    $2,651
    Go to site
    • $2,000 cashback for new loans (T&Cs apply)
    • Up to $10,000 extra repayments annually
    • One free residential valuation per application

  • First Home Buyer Loan

    • Owner occupier
    • Principal & Interest
    • 5% min deposit
    • For first home buyers
    • Offset available
    • Redraw available
    Interest rate
    4.99 % p.a.
    Variable
    Comparison rate
    5.04 % p.a.
    Initial monthly repayment
    $2,681
    Go to site
    • Competitive interest rate – 4.99% p.a. (comparison rate* 5.04% p.a.)
    • Offset account to reduce interest and save on repayments
    • No establishment or monthly fees, plus valuation fees waived up to $1,000 (limited time)

  • 1-Year Fixed Simple Home Loan Special

    • Fixed rate
    • Owner occupier
    • Principal & Interest
    • 40% min deposit
    • Refinance only
    • Redraw available
    Interest rate
    4.99 % p.a.
    Fixed 1 year
    Comparison rate
    5.22 % p.a.
    Initial monthly repayment
    $2,681
    Go to site
    • No application, ongoing or monthly fees
    • Make unlimited extra repayments and access funds with free redraw
    • Get up to $1,000 towards legal and valuation costs (T&Cs apply)

  • Fixed Home Loan

    • Fixed rate
    • Owner occupier
    • Principal & Interest
    • 5% min deposit
    • Redraw available
    • Cashback
    Interest rate
    4.99 % p.a.
    Fixed 2 years
    Comparison rate
    5.47 % p.a.
    Initial monthly repayment
    $2,681
    Go to site
    • Get up to $4,000 cashback (T&Cs apply)
    • Up to 12 months repayments in advance without penalties
    • Split loan available

  • 1-Year Fixed Complete Home Loan Special

    • Fixed rate
    • Owner occupier
    • Principal & Interest
    • 40% min deposit
    • Refinance only
    • Offset available
    • Redraw available
    Interest rate
    4.99 % p.a.
    Fixed 1 year
    Comparison rate
    5.71 % p.a.
    Initial monthly repayment
    $2,681
    Go to site
    • Offset account can help you save on interest
    • Make unlimited extra repayments and access funds with free redraw
    • Get up to $1,000 towards legal and valuation costs (T&Cs apply)

  • Special Budget Home Loan

    • Owner occupier
    • Principal & Interest
    • 20% min deposit
    • Redraw available
    Interest rate
    5.19 % p.a.
    Variable
    Comparison rate
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    Initial monthly repayment
    $2,742
    Go to site
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  • Discount Great Rate Home Loan

    • Owner occupier
    • Principal & Interest
    • 20% min deposit
    • Redraw available
    • Cashback
    Interest rate
    5.19 % p.a.
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    Comparison rate
    5.20 % p.a.
    Initial monthly repayment
    $2,742
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    • Get up to $3,000 cashback when you apply online (T&Cs apply)
    • No paperwork or payslips required (see site for details)
    • Low variable rate

  • Lite Variable Home Loan

    • Owner occupier
    • Principal & Interest
    • 20% min deposit
    • Redraw available
    Interest rate
    5.19 % p.a.
    Variable
    Comparison rate
    5.21 % p.a.
    Initial monthly repayment
    $2,742
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    • No ongoing home loan fees
    • Make additional repayments and redraw at no extra cost

  • Unloan Variable Home Loan

    • Owner occupier
    • Principal & Interest
    • 20% min deposit
    • Redraw available
    Interest rate
    5.24 % p.a.
    Variable
    Comparison rate
    5.15 % p.a.
    Initial monthly repayment
    $2,758
    Go to site
    • The first home loan with an automatic loyalty discount (conditions apply)
    • No application or banking fees
    • Built by CommBank

  • Simple Home Loan Variable

    • Owner occupier
    • Principal & Interest
    • 40% min deposit
    • Redraw available
    Interest rate
    5.24 % p.a.
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    Comparison rate
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    Initial monthly repayment
    $2,758
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    • Make unlimited extra repayments and access funds via a free redraw facility

  • OMG Home Loan

    • Owner occupier
    • Principal & Interest
    • 40% min deposit
    • Redraw available
    Interest rate
    5.24 % p.a.
    Variable
    Comparison rate
    5.27 % p.a.
    Initial monthly repayment
    $2,758
    Go to site
    • No ongoing annual fees
    • Pre-approval valid for 3 months

  • Budget Home Loan

    • Owner occupier
    • Principal & Interest
    • 20% min deposit
    • Redraw available
    • Cashback
    Interest rate
    5.29 % p.a.
    Variable
    Comparison rate
    5.32 % p.a.
    Initial monthly repayment
    $2,773
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    • Get up to $4,000 cashback (T&Cs apply)
    • Split loan available

  • Variable Home Loan 90

    • Owner occupier
    • Principal & Interest
    • 10% min deposit
    • Offset available
    • Redraw available
    Interest rate
    5.29 % p.a.
    Variable
    Comparison rate
    5.33 % p.a.
    Initial monthly repayment
    $2,773
    Go to site
    • No monthly or ongoing fees
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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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