How Much Should You Pay a Contractor Upfront?
The right payment structure protects both you and the contractor. Here's how to avoid paying too much while keeping your project on track.
"How much should I pay upfront?" is one of the most common questions homeowners ask — and getting it wrong can be costly. Pay too little and a contractor might not start. Pay too much and you lose leverage if problems arise.
The Golden Rule
Never pay more than 30% upfront. For most projects, 10-20% is standard and reasonable.
Standard Payment Structure
| Payment | Amount | When |
|---|---|---|
| Deposit | 10-30% | Upon signing contract |
| Progress Payment 1 | 25-30% | After materials delivered & demo complete |
| Progress Payment 2 | 25-30% | At project midpoint (rough-in complete) |
| Final Payment | 10-15% | Upon final completion & inspection |
Why Contractors Ask for Deposits
Legitimate reasons for upfront payment:
- Materials — Many contractors don't have credit accounts with suppliers
- Permits — Fees need to be paid before work starts
- Commitment — Shows you're serious about the project
- Scheduling — Blocks time in their calendar for your project
Red Flag: Large Upfront Demands
Be extremely cautious if a contractor asks for:
- More than 50% upfront for any reason
- Full payment before work begins
- Cash only (no paper trail)
- "Special discount" for paying everything upfront
These are classic signs of a scam. Legitimate contractors with established businesses have credit with suppliers and don't need your money upfront.
Payment Structure by Project Type
Small Projects (Under $5,000)
- Deposit: 0-20% (sometimes materials are paid at completion)
- Final: 80-100% upon completion
For small jobs, some contractors don't require any deposit.
Medium Projects ($5,000 - $25,000)
- Deposit: 10-20%
- Midpoint: 30-40%
- Substantial completion: 30-40%
- Final: 10-15%
Large Projects (Over $25,000)
- Deposit: 10% (should not exceed $10,000)
- Multiple progress payments tied to specific milestones
- Final retention: 10%
For large projects, consider using an escrow service for added protection.
How to Protect Yourself
- Tie payments to milestones. Not dates. If work isn't complete, don't pay.
- Define milestones clearly. "Kitchen rough-in complete" is better than "50% done."
- Keep the final payment meaningful. 10-15% gives you leverage to ensure punch list items get completed.
- Pay by check or card. Never cash. You want a paper trail.
- Get receipts for materials. If you're paying for materials separately, see proof they were purchased.
- Document with photos. Before each payment, photograph the completed work.
What If They Demand More Upfront?
If a contractor insists on more than 30% upfront:
- Ask why. Is there a legitimate reason?
- Offer to pay for materials directly (have them sent to your address)
- Get multiple quotes — other contractors may offer better terms
- Consider it a red flag and proceed with caution
- Walk away if they won't negotiate
Indiana Law Note
Indiana doesn't have specific laws limiting contractor deposits, but the Indiana Home Improvement Contract Act requires contracts for work over $150 to be in writing and include payment terms. If a contractor violates the contract terms, you have legal recourse.
Payment Protection Built In
With Vetted Crews, payments are tied to verified milestones. We inspect work before releasing funds to the contractor — so you never pay for incomplete work.
Get Protected Payments