What is a drawdown?

Couple on a computer searching up home loan terms like drawdown

A drawdown is the release of funds under an agreement with a lender. 

When it comes to home loans, ‘draw down’ means you are using the money the lender provided to buy the property. This term is typically used by lenders to describe when your loan is actually paid to you, usually on settlement of the property.

During 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 the vendor. 

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.

Construction loan and drawing down in stages

Most construction loans use 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, Juan 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 Juan 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.

Home loan comparisons on Mozo - rates updated daily

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure.
  • placeholder
    Mozo Experts Choice 2021
    Smart Booster Home Loan

    2 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    1.85% p.a.variable for 24 months and then 2.25% p.a. variable
    2.21% p.a.

    New super low introductory rate home loan for two years. Min 20% deposit. No monthly or ongoing fees. Fast settlement times. Mozo award-winning online lender. Friendly, local Australian based team.

    Go to site
    Details
  • placeholder
    UHomeLoan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.95% p.a.
    fixed 3 years
    2.27% p.a.

    $0 fees and easy application. Choose between weekly, fortnightly or monthly repayments. 3 year fixed rates are for new Owner Occupier Principal & Interest loans.

    Go to site
    Details
  • placeholder
    Mozo Experts Choice 2021
    Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    1.99% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid down. Free extra repayments and redraw facility. Zero fees. Min 40% deposit required. Winner of three Mozo Expert's Choice Awards for 2021.

    Go to site
    Details
  • placeholder
    Variable Home Loan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    1.99% p.a.

    Refinance only. Super-fast digital application process. Zero upfront fees. No on-going service fees. Free 100% offset sub account. Comes with Visa debit card and the ability to use digital wallets; Apple and Google Pay. 25% deposit required.

    Go to site
    Details
  • placeholder
    Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR<70%

    interest rate
    comparison rate
    Initial monthly repayment
    2.09% p.a.
    fixed 3 years
    2.32% p.a.

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.

    Go to site
    Details

* 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, loan amount and term entered. 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.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.