How much deposit should I pay a contractor upfront?

For projects under $10,000, a 10–25% deposit is reasonable. For larger projects, keep upfront deposits at 10–15% — enough to cover the contractor's mobilization costs but not so much that you lose leverage. Never pay more than 33% upfront regardless of project size.

What is a draw schedule for a contractor?

A draw schedule is a pre-agreed payment plan tied to construction milestones — for example, 10% at contract signing, 25% at demo complete, 25% at rough inspections passed, 25% at finish work complete, and 15% at final punch list approval. Milestone-based draws protect both sides.

Is it legal for a contractor to ask for 50% upfront?

In many states, 50% upfront exceeds legal limits on contractor deposits. California limits deposits to 10% or $1,000, whichever is less, on home improvement contracts. Other states have similar caps. A demand for 50% upfront is a significant red flag.

What should I withhold at the end of a project?

Retain 10–15% of the total contract value as a final payment until the punch list is complete, all subcontractors have been paid (evidenced by lien waivers), and the final city inspection has passed. This is called a retainage and is standard industry practice.

Contractor Payment Schedule Guide: How Much to Pay and When

April 25, 2026

Why Payment Schedules Matter

Money is your primary leverage in a construction project. A poorly structured payment schedule — one that front-loads too much cash — transfers all your leverage to the contractor before the work is done. Conversely, withholding too much too early can create cash-flow problems for legitimate contractors who need to pay their subs. The right structure protects both sides and creates clear, milestone-based accountability.

The Standard Draw Schedule Structure

For a $50,000–$200,000 remodel, most experienced contractors and construction attorneys recommend this milestone-based structure:

Contract signing (10%): Covers mobilization, material ordering, permit application fees.
Demo and rough framing complete (20%): Verified by site visit or photos. Permits should be posted on-site by this point.
Rough mechanical inspections passed (25%): Rough plumbing, electrical, and HVAC have passed city inspection. This is a clear, verifiable milestone.
Drywall complete and primed (20%): Walls are closed, inspections passed, finish work beginning.
Substantial completion (15%): All major work done, fixtures installed, functional but minor items remaining.
Final punch list and inspection approved (10%): Every item on the punch list resolved, final city inspection passed, lien waivers collected.

State-by-State Deposit Limits

Several states have enacted homeowner protection laws limiting how much a contractor can legally collect upfront:

California: Maximum deposit is 10% of total price or $1,000 — whichever is less (CSLB regulation)
Virginia: Cannot exceed one-third of the total contract price
Maryland: Cannot exceed one-third of total contract amount
Michigan: Deposits limited by the Home Improvement Finance Act
New York: Home improvement contractors cannot demand more than one-third upfront

Even in states without explicit limits, paying more than 33% upfront is inadvisable and inconsistent with industry norms. Any contractor demanding 50% or more before work begins should be viewed with skepticism.

Tying Payments to Verifiable Milestones

The key to a protective payment schedule is making each milestone objectively verifiable. Vague milestones like "project is 50% done" invite disputes. Strong milestones include:

Permit posted on job site
Demo complete (specific rooms)
Rough electrical/plumbing inspection certificate issued
Drywall taped and ready for prime
Cabinets installed and leveled
Final certificate of occupancy or inspection signed

Each payment trigger should include a statement that the contractor has provided a conditional lien waiver from all subcontractors and suppliers for work done through that draw.

Retainage: Your Final Leverage

Hold back 10–15% of the contract value as retainage until all of the following are complete: punch list items resolved, lien waivers from all subs and suppliers, final city inspection passed, and any manufacturer warranties registered in your name. This retainage is your most powerful incentive for a contractor to return promptly for punch list items rather than moving on to their next project.

Browse licensed general contractors in your city to find professionals who work within standard payment structures — a transparent payment schedule is a green flag that separates experienced contractors from fly-by-night operators.

Frequently Asked Questions

How much deposit should I pay a contractor upfront?: For projects under $10,000, a 10–25% deposit is reasonable. For larger projects, keep upfront deposits at 10–15% — enough to cover the contractor's mobilization costs but not so much that you lose leverage. Never pay more than 33% upfront regardless of project size.
What is a draw schedule for a contractor?: A draw schedule is a pre-agreed payment plan tied to construction milestones — for example, 10% at contract signing, 25% at demo complete, 25% at rough inspections passed, 25% at finish work complete, and 15% at final punch list approval. Milestone-based draws protect both sides.
Is it legal for a contractor to ask for 50% upfront?: In many states, 50% upfront exceeds legal limits on contractor deposits. California limits deposits to 10% or $1,000, whichever is less, on home improvement contracts. Other states have similar caps. A demand for 50% upfront is a significant red flag.
What should I withhold at the end of a project?: Retain 10–15% of the total contract value as a final payment until the punch list is complete, all subcontractors have been paid (evidenced by lien waivers), and the final city inspection has passed. This is called a retainage and is standard industry practice.