Homeowners have a number of options when arranging for a contractor payment. The contractor agreement should include a detailed contractor payment schedule so there is no doubt when and how payment is made.

Many people opt to make a contractor down payment, followed by a second payment partway through the contract, and then a final payment when the home improvement project is complete.

Contractor Down Payments

A contractor is likely to insist on a down payment before work begins. Homeowners should try to limit the amount on any contractor down payment to a third or less of the total cost. By doing so the homeowner maintains control over the contractor payment schedule should conflicts arise.

Many states limit the down payment amount home improvement contractors can request. Homeowners should check with the Office of Consumer Affairs to determine whether such restrictions apply in their state.

A Three Part Contractor Payment Schedule

After the down payment, many contractor payment terms require a second payment approximately halfway through the project. The contractor agreement should detail exactly what must be completed before the second payment is made. Again, this gives the homeowner some control over the contractor payment schedule and some assurances that enough work is completed to warrant payment.

The final payment is made after the project is completed. If there are problems with the project, the homeowner may refuse payment until such problems are resolved.

The final payment in the contractor payment schedule should not be made until the homeowner has proof all subcontractors and suppliers have been paid by the home improvement contractor. If suppliers or subcontractors were not paid, they could place liens on the house.

Contractor Payment Terms to Avoid

As a safety precaution, never pay cash to home improvement contractors. If a contractor insists the contractor down payment be made in cash, it’s possible the contractor is running a scam and will disappear with your money.

Be wary, as well, of home improvement contractors who insist on payment in full up front. If the work provided is substandard or unfinished, the homeowner has little leverage if the contractor has been fully paid. And as with a cash payment, it’s possible a dishonest contractor could vanish with your money.

Some home improvement contractors offer financing as part of their contractor payment terms. Homeowners who investigate financing offered by contractors should read any agreements very carefully. While many home improvement contractors offer legitimate financing opportunities, some offer terms that include high rates of interest and unreasonable payment schedules.