February 24, 2026·7 min read

The Home Renovation Payment Schedule: Don't Pay Before Work is Done

Your payment schedule is the most powerful tool you have on a renovation project. It determines who holds the leverage at every stage of the work. Pay too much too early, and you lose your ability to enforce quality and timelines. Structure your payments around verified milestones, and you maintain control from demolition day through final walkthrough. Yet the majority of homeowners accept whatever payment terms their contractor proposes without negotiation. This guide explains how to structure a payment schedule that protects your investment and keeps your project on track.

Why Payment Schedules Matter

A payment schedule is not just an administrative detail. It is a risk management strategy. Every dollar you pay before work is complete represents risk you have transferred from the contractor to yourself. If the contractor abandons the project, does substandard work, or goes out of business, unearned payments are extraordinarily difficult to recover. State contractor recovery funds, where they exist, typically cap payouts at $10,000 to $25,000 — a fraction of what homeowners lose on failed projects.

According to the National Association of Consumer Advocates, payment disputes are the number one source of conflict between homeowners and contractors. In nearly every case, the homeowner who paid ahead of the work is in a weaker position than the homeowner who held payments until milestones were verified.

A well-structured payment schedule does three things: it ensures the contractor has enough cash flow to operate, it protects you from paying for work that has not been completed, and it creates natural checkpoints where both parties confirm the project is on track.

Standard Payment Structures

There is no single "correct" payment schedule, but several structures are widely used in residential renovation. The right one depends on the size, duration, and complexity of your project.

The 10-30-30-30 Structure

This is the most homeowner-friendly standard structure and works well for projects ranging from $10,000 to $100,000 or more:

10% at signing — covers contract execution, permits, and initial material procurement
30% after rough-in — paid when demolition is complete and structural, plumbing, and electrical rough-in work passes inspection
30% at midpoint — paid when drywall, tiling, cabinetry, or other mid-stage work is complete
30% at final completion — paid only after a thorough walkthrough and punch list resolution

This structure keeps your upfront exposure to just 10% and maintains meaningful leverage through every phase of the project.

The 33-33-33 Structure

Some contractors prefer this simpler three-payment structure:

33% at start — covers mobilization and the first phase of work
33% at midpoint — paid when the project reaches the halfway mark
33% at completion — paid upon final walkthrough approval

While simpler, this structure has a significant downside: one-third of the total project cost upfront is more risk than necessary. On a $60,000 project, that is $20,000 before meaningful work has been completed. If you use this structure, push hard to reduce the first payment to 20% or less and redistribute the balance to later milestones.

Milestone-Based Structure

For complex or long-duration projects, a milestone-based schedule offers the most precision. Instead of fixed percentages at arbitrary points, payments are tied to specific, verifiable deliverables:

Contract signing — 10% deposit
Demolition complete — 10% (site cleared, debris removed)
Rough-in complete and inspected — 20% (framing, plumbing, electrical, HVAC)
Drywall and insulation complete — 15%
Fixtures, cabinetry, and finish work — 20%
Substantial completion — 15%
Punch list resolved and final sign-off — 10%

This approach requires more documentation but gives you the greatest control over quality and progress.

Why You Should Never Pay More Than 10% Upfront

Industry best practice — and the law in several states — limits upfront deposits to 10% of the contract price or $1,000, whichever is less. California, for example, caps contractor deposits at $1,000 or 10% under Business and Professions Code Section 7159. Maryland limits deposits to one-third of the contract price. Even in states without legal caps, there is no legitimate reason for a contractor to demand more than 10% before work begins.

A reputable contractor with established supplier relationships can order materials on account. They have operational cash flow from other projects. A demand for 30%, 40%, or 50% upfront often signals one of three things: the contractor is using your deposit to fund a different project, the contractor has cash flow problems that may affect your project, or the contractor does not intend to complete the work as described.

If a contractor insists on a larger deposit due to expensive specialty materials — imported stone, custom cabinetry, or similar items — ask them to provide the supplier invoice. You can pay the supplier directly for those materials, keeping your deposit to the contractor at 10% or less while ensuring the materials are ordered and paid for.

Defining Milestones Clearly

A milestone payment is only as protective as the milestone definition. "Rough-in complete" means nothing if you and your contractor have different interpretations. Every milestone in your contract should include specific, observable criteria.

Demolition Complete

All existing materials, fixtures, and structures identified for removal have been removed. The site has been cleaned of debris. Any hazardous materials (asbestos, lead paint) have been abated by licensed professionals with documentation. The area is ready for new construction to begin.

Rough-In Complete

All structural framing is in place. Plumbing supply and drain lines are installed and pressure tested. Electrical wiring, boxes, and panel upgrades are installed. HVAC ductwork is run. All rough-in work has passed municipal inspection. This is a critical milestone because rough-in work is hidden behind walls once drywall goes up. Municipal inspection at this stage is essential.

Fixtures and Finish Work

Cabinetry is installed and level. Countertops are templated or installed. Plumbing fixtures (sinks, faucets, toilets) are installed and functional. Light fixtures are installed and operational. Tile work is complete with grouting finished. Paint is applied to final coats. Hardware is installed.

Final Completion

All contracted work is complete per the scope of work. All systems are functional. The space has been cleaned. All municipal inspections have passed and certificates of occupancy or completion are issued where required. The project matches the contract specifications.

The Final Holdback: Your Most Important Protection

Always withhold 5% to 10% of the total contract price until every item on your punch list is resolved. The punch list is a written inventory of defects, incomplete items, and corrections identified during your final walkthrough. Common punch list items include touch-up paint, hardware adjustments, grout repairs, door alignment, caulking, and minor finish corrections.

The final holdback is your leverage to ensure these items actually get fixed. Once a contractor has received full payment, their incentive to return for minor corrections drops dramatically. A $5,000 to $10,000 holdback on a $100,000 project ensures they come back to address every item on the list.

A contractor who does quality work will not object to a reasonable holdback. They know the punch list process is standard and that the holdback will be released promptly once the work is right. Resistance to a final holdback is a meaningful warning sign.

Mechanics Liens: What Every Homeowner Must Know

A mechanics lien is a legal claim placed against your property by a contractor, subcontractor, or material supplier who has not been paid for work performed or materials delivered to your property. Mechanics liens are governed by state law and can be filed even if you have paid your general contractor in full.

Here is how it works in practice: you pay your general contractor $80,000 for a renovation. The general contractor owes $15,000 to a plumbing subcontractor but does not pay them. The plumbing subcontractor files a mechanics lien against your home. You now owe $15,000 on top of the $80,000 you already paid. If you do not pay, the lienholder can, in most states, force a sale of your property to satisfy the debt.

How to Protect Yourself

Require lien waivers at every payment — each time you make a payment, your contractor must provide signed lien waivers from all subcontractors and suppliers who performed work or delivered materials during that payment period
Use joint checks — for large subcontractor payments, issue two-party checks made out to both the general contractor and the subcontractor, ensuring the sub is paid directly
Verify subcontractor payments — ask your contractor to provide proof that subcontractors have been paid before you release the next milestone payment
Know your state's lien deadlines — mechanics lien filing deadlines vary by state, typically ranging from 60 to 120 days after the last day of work. Understanding these timelines helps you know when you are in the clear

Payment Documentation Best Practices

Every payment you make should be documented thoroughly. This is not about distrust — it is about clarity and protection for both parties.

Never pay cash — always use checks, bank transfers, or credit cards that create a paper trail. If a contractor insists on cash, walk away
Note the milestone on every payment — each check or transfer should reference the specific milestone being paid (e.g., "Payment 2 of 4: Rough-in milestone per contract dated January 15, 2026")
Get signed receipts — for every payment, obtain a signed receipt from the contractor acknowledging the amount, date, and milestone covered
Track cumulative payments — maintain a running ledger of all payments made versus the total contract amount, including any approved change orders. Tools like Quoterly can help you track payments against milestones and flag when cumulative payments are running ahead of project completion
Photograph milestone completion — before releasing any payment, take dated photographs documenting the completed milestone. These photos serve as evidence if a dispute arises later

What to Do If a Contractor Demands More Upfront

If a contractor you otherwise like pushes for a larger deposit or an unfavorable payment structure, try these approaches:

Explain your position calmly — "I am happy to work with you, but I structure all my projects with milestone-based payments. This protects both of us and is standard industry practice."
Offer to pay suppliers directly — if the concern is material costs, offer to pay the supplier directly for large orders. This gets the contractor what they need without increasing your risk.
Propose a compromise — if 10% genuinely does not cover their mobilization costs on a smaller project, consider 15% to 20% at signing with correspondingly larger holdback at the end.
Walk away if necessary — if a contractor will not agree to a reasonable payment structure, they are not the right contractor for your project. A professional with healthy finances and good intentions will not need your money before they have done the work.

The Bottom Line

Your payment schedule is not a formality. It is the mechanism that keeps your renovation project on track and your financial exposure under control. A fair schedule protects both parties: the contractor gets predictable cash flow tied to real progress, and you get assurance that your money is only going toward completed, quality work.

Keep your upfront deposit at 10% or less. Tie every subsequent payment to a clearly defined, verifiable milestone. Hold back 5% to 10% for punch list resolution. Collect lien waivers at every payment. Document everything. These practices are not adversarial — they are professional. The best contractors expect them, and the ones who resist them are telling you something important about how they do business.