The short version: Never pay a contractor in full upfront. A fair deposit is around 10%, and some states cap it by law. After that, pay in milestones tied to completed work, keeping the money slightly behind the progress. Hold a final 10% until the job is finished and inspected, collect lien waivers so an unpaid subcontractor cannot lien your home, and pay by check or credit card, never large cash or wire. This one discipline stops most contractor scams.

Why the payment schedule is your best protection

You can vet a contractor carefully and still lose money if you hand it over at the wrong time. How and when you pay is the protection that matters most.

A demand for a large payment upfront is the number one tactic of contractor scams that target older homeowners: the money is taken, and the work is never finished, or never started.2 The defense is simple and powerful: keep your money slightly behind the work at every stage, so the contractor always has a reason to come back and finish.

This guide pairs with our contract clauses to watch and contractor red flags guides.

The deposit: keep it small

The first payment sets the tone. A fair, safe deposit is modest.

A common and reasonable deposit is around 10% of the contract price, enough to show good faith and cover a contractor’s initial costs, not a large chunk of the total.1 Some states cap it by law. In California, for example, the down payment cannot legally exceed 10% or $1,000, whichever is less.3

Walk away if you hear this: a demand for full payment upfront, a very large deposit, cash only, or a “special price if you pay today.” Legitimate contractors do not need your money before they have done the work, and pressure to pay fast is the scammer’s oldest move.

The progress payment schedule

After the deposit, the rest should be paid in stages tied to real progress, and it belongs in writing.

Break the job into milestones, each attached to a specific piece of completed work, for example a payment when materials arrive, another when rough work passes inspection, and a final payment at completion. Each payment should be stated in dollars, describe exactly what it covers, and never exceed the value of the work already done.3

Put this schedule in the contract, so both sides know precisely what triggers each payment. Our contract clauses guide covers what else the written agreement needs.

The rule to remember: the money always trails the work. Pay for a stage only after it is truly finished, never in advance. A contractor asking to be paid ahead of the work is asking you to carry all the risk.

Hold the final payment

The last payment is your leverage, so do not give it up early.

Keep a meaningful final payment, often around 10% of the total, until the work is completely finished, the punch list of small fixes is done, and any required inspection has passed. Contractors expect this holdback; an honest one will not object.

Before you release it, walk the finished work carefully, ideally with our final inspection checklist. Do not let “it’s basically done” or an eager contractor talk you into paying before the details are right.

Lien waivers: the trap most people miss

This is the protection almost no homeowner knows about, and it can cost you twice.

If your contractor does not pay their subcontractors or suppliers, those unpaid parties can place a mechanic’s lien on your home, even though you already paid the contractor in full.5 A lien waiver prevents this.

What to collect: a signed lien waiver with each payment, and unconditional final lien waivers from the contractor and every subcontractor and supplier when you make the last payment. This ensures a bill you already covered cannot come back as a claim against your house.

How to actually pay

The payment method matters as much as the timing.

  • Use a check or a credit card. Both leave a paper trail; a credit card also adds dispute rights if the work is not done.4
  • Avoid large cash. It leaves no record and cannot be recovered.
  • Never wire money, buy gift cards, or use a payment app to send funds to someone you do not know well. These are favorite scam channels because they are hard to reverse.
  • Be wary of paying a personal account rather than a registered business account for a large job.
  • Keep every receipt and a note of what each payment covered.

Put the whole plan in writing

None of this protects you unless it is in the signed contract before work starts.

The contract should state the total price, the deposit amount, the full progress payment schedule with what each payment covers, the final holdback, and the requirement for lien waivers. Get three written quotes first, confirm the contractor is licensed, insured, and bonded, and only then sign. For help hiring the right person, see our guide to finding a senior-friendly contractor.

Contractor payment action plan:
  1. Never pay in full upfront; keep the deposit around 10%
  2. Pay in milestones tied to completed work, written into the contract
  3. Keep the money slightly behind the progress at all times
  4. Hold a final 10% until the job is finished and inspected
  5. Collect lien waivers so an unpaid sub cannot lien your home
  6. Pay by check or credit card; never large cash or wire

What’s next

Citations

  1. Hiring a Contractor. U.S. Federal Trade Commission, retrieved August 24, 2026. .
  1. How to Avoid Home Improvement Scams. U.S. Federal Trade Commission, retrieved August 24, 2026. .
  1. Consumers: Down Payment and Progress Payments. California Contractors State License Board (CSLB), retrieved August 24, 2026. .
  1. Tips for Hiring a Contractor. Better Business Bureau, retrieved August 24, 2026. .
  1. Mechanics’ Liens and Lien Waivers (Consumer Guide). California Contractors State License Board (CSLB), retrieved August 24, 2026. .