Down Payments and Payment Schedules Explained

Payment disputes are the most common source of contractor problems. Understanding how payments should be structured protects you before work starts.

The standard payment structure

• Down payment: 10–30% — Covers materials and mobilization. Anything above 30% upfront is a risk. Never pay 50%+ upfront for a project that hasn't started.
• Progress payments: tied to milestones — Payment releases when specific, verifiable milestones are met. "Work to date" is too vague. "Framing complete and inspected" is a milestone.
• Final payment: 10–15% — Retained until all work is complete, any deficiencies are corrected, and you have all warranties, permits, and final inspection approvals in hand.

Warning signs in payment requests

• Requests for more than 30% upfront before a shovel hits the ground
• Requests for the full contract amount before work is complete
• Pressure to release a progress payment before a milestone is actually complete
• Cash-only requests (can't be traced or disputed)

Protecting yourself with lien waivers

Before making any progress payment, ask your contractor for a "lien waiver" for the amount being paid. This is a legal document confirming they (and their subcontractors and suppliers) have been paid and waiving their right to file a mechanic's lien against your property for that amount of work. Without lien waivers, you could end up paying twice if a contractor doesn't pay their subs.