What is a drawdown loan?

By Maria Gil · · 2 min read
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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.

Last updated 18 May 2025 Important disclosures and comparison rate warning*
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    Unloan Variable Home Loan

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    • Principal & Interest
    • 40% min deposit
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    Initial monthly repayment
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  • Fixed Rate Home Loan

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    • Owner occupier
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    • 5% min deposit
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    Initial monthly repayment
    $2,836
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  • Fixed Rate Home Loan

    • Fixed rate
    • Owner occupier
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    • Interest only
    • 20% min deposit
    Interest rate
    5.49 % p.a.
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    Comparison rate
    5.96 % p.a.
    Initial monthly repayment
    $2,836
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    • Free extra repayments of up to $25,000 during the fixed rate period.
    • Split loan available
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  • Home Loan

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    • Principal & Interest
    • 40% min deposit
    • Redraw available
    Interest rate
    5.69 % p.a.
    Variable
    Comparison rate
    5.70 % p.a.
    Initial monthly repayment
    $2,899
    Go to site
    • Offset and non-offset options for flexible payments
    • No application and monthly account keeping fees
    • Get up to $4,000 cashback (T&Cs apply)

  • Fixed Home Loan

    • Fixed rate
    • Owner occupier
    • Principal & Interest
    • 5% min deposit
    • Redraw available
    • Cashback
    Interest rate
    5.69 % p.a.
    Fixed 2 years
    Comparison rate
    6.00 % p.a.
    Initial monthly repayment
    $2,899
    Go to site
    • Get up to $4,000 cashback (T&Cs apply)
    • Up to 12 months repayments in advance without penalties
    • Split loan available

  • Unloan Variable Home Loan

    • Owner occupier
    • Principal & Interest
    • 20% min deposit
    • Redraw available
    Interest rate
    5.74 % p.a.
    Variable
    Comparison rate
    5.65 % p.a.
    Initial monthly repayment
    $2,915
    Go to site
    • Built by CommBank
    • The first home loan with an increasing discount (conditions apply)
    • No application or banking fees

  • OMG Home Loan

    • Owner occupier
    • Principal & Interest
    • 40% min deposit
    • Redraw available
    Interest rate
    5.74 % p.a.
    Variable
    Comparison rate
    5.77 % p.a.
    Initial monthly repayment
    $2,915
    Go to site
    • No ongoing annual fees
    • Pre-approval valid for 3 months

  • Basic Variable Home Loan

    • Owner occupier
    • Principal & Interest
    • 5% min deposit
    • Redraw available
    Interest rate
    5.74 % p.a.
    Variable
    Comparison rate
    5.79 % p.a.
    Initial monthly repayment
    $2,915
    Go to site
    • No monthly or annual fees
    • Make extra repayments, access to redraw and pay out early without penalty
    • Choose weekly, fortnightly or monthly repayments

  • Fixed Home Loan

    • Fixed rate
    • Owner occupier
    • Principal & Interest
    • 10% min deposit
    • Offset available
    • Redraw available
    Interest rate
    5.74 % p.a.
    Fixed 2 years
    Comparison rate
    5.81 % p.a.
    Initial monthly repayment
    $2,915
    Go to site
    • $0 application fee to pay
    • Additional repayments up to $20,000/year
    • Apply in as little as 15 minutes

  • Variable Home Loan

    • Owner occupier
    • Principal & Interest
    • 10% min deposit
    • Offset available
    • Redraw available
    Interest rate
    5.78 % p.a.
    Variable
    Comparison rate
    5.82 % p.a.
    Initial monthly repayment
    $2,927
    Go to site
    • $0 application fee to pay
    • Unlimited additional repayments
    • Apply in as little as 15 minutes

  • Budget Home Loan

    • Owner occupier
    • Principal & Interest
    • 20% min deposit
    • Redraw available
    • Cashback
    Interest rate
    5.79 % p.a.
    Variable
    Comparison rate
    5.82 % p.a.
    Initial monthly repayment
    $2,931
    Go to site
    • 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
    5.79 % p.a.
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    5.83 % p.a.
    Initial monthly repayment
    $2,931
    Go to site
    • No monthly or ongoing fees
    • Option to add an offset for 0.10% p.a.

  • Flex Home Loan

    • Fixed rate
    • Owner occupier
    • Principal & Interest
    • 40% min deposit
    • Offset available
    • Redraw available
    Interest rate
    5.79 % p.a.
    Fixed 2 years
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    Initial monthly repayment
    $2,931
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    $2,947
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    • Free extra repayments
    • Easy redraw facility
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  • Flex Home Loan

    • Owner occupier
    • Principal & Interest
    • 40% min deposit
    • Offset available
    • Redraw available
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    Variable
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    6.08 % p.a.
    Initial monthly repayment
    $2,947
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    • Free extra repayments
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  • Home Loan with Offset

    • Owner occupier
    • Principal & Interest
    • 40% min deposit
    • Offset available
    • Redraw available
    Interest rate
    5.88 % p.a.
    Variable
    Comparison rate
    5.89 % p.a.
    Initial monthly repayment
    $2,959
    Go to site
    • Offset and non-offset options for flexible payments
    • No application and monthly account keeping fees
    • Get up to $4,000 cashback (T&Cs apply)

  • Basic Variable Home Loan

    • Owner occupier
    • Principal & Interest
    • 40% min deposit
    • Redraw available
    Interest rate
    5.88 % p.a.
    Variable
    Comparison rate
    5.91 % p.a.
    Initial monthly repayment
    $2,959
    Go to site
    • No ongoing monthly loan maintenance fees
    • Weekly, fortnightly, or monthly repayment options
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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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