Quick answer
An off the plan purchase means buying a home before it is built, usually paying a deposit now and the balance at settlement months or years later. The key finance issue is that approval, valuation and your circumstances are all tested again near settlement. Ownright Custom Finance arranges off the plan home loans Australia-wide and plans for the timing risks.
Key points
- You sign now but borrow at settlement, often much later
- Lenders may re-check your income, debts and the valuation near settlement
- A low valuation can leave a gap to fill
- Planning the finance before you sign the contract reduces nasty surprises
- Suits
- Buyers of apartments, townhouses and house-and-land packages
- Security
- The new property once complete
- Key risk
- Value and finance changing between signing and settlement
- Australia-wide
- Yes
What does buying off the plan mean for your finance?
Buying off the plan means committing to a property before it exists. You sign a contract based on plans and a brochure, pay a deposit and wait. Settlement happens when the building is finished and titled, which might be many months or even a couple of years later.
From a finance point of view, that gap is the whole story. You usually do not borrow the main amount on the day you sign. You borrow at settlement, when your income, debts, credit history and the final valuation are checked again. A lot can change in between, which is why a smart off the plan buyer plans the loan before signing.
Who buys off the plan?
- First home buyers chasing a new apartment or townhouse
- Investors who want a new property with depreciation potential
- Downsizers moving into a modern low-maintenance home
- Buyers using a house-and-land package in a new estate
- Overseas or interstate buyers purchasing for a future move
The finance timeline
| Stage | What happens | What to watch |
|---|---|---|
| Before signing | Check borrowing capacity and contract terms | Cooling-off, sunset clauses, deposit size |
| Contract signed | Deposit paid, often 10 percent or as negotiated | Where the deposit is held |
| During construction | Wait for completion | Changes in your income or credit |
| Close to settlement | Final application, valuation and approval | Valuation against contract price |
| Settlement | Balance paid, loan starts | Funds, insurance, final checks |
Our guide to how valuations work for a loan explains the valuation step.
What do lenders look at near settlement?
The valuation. The lender values the finished property, usually just before settlement. If it comes in under the contract price, the loan amount is based on the lower figure.
Your income and debts. Lenders reassess serviceability at the time you apply, not when you signed. See what is loan serviceability.
Your credit file. New credit or late payments during the wait can reduce your options.
The property. Some lenders limit lending on small apartments, high-density towers or certain locations.
Your deposit. Lenders look at your overall contribution, including any deposit already paid.
The main risks to prepare for
- Valuation shortfall. The market can move, or the finished apartment may value differently from the original price.
- Changing lender policy. A lender that would lend at signing may tighten criteria by settlement.
- Delays. Sunset clauses and construction delays can push settlement beyond the validity of an approval.
- Cash buffers. Stamp duty, legal fees and a possible gap all need funds on hand.
State revenue offices publish current stamp duty concession details for new homes and off the plan purchases, and these vary between jurisdictions and change over time.
Planning your off the plan finance
Before you sign, it helps to know your borrowing capacity under conservative assumptions, and to keep a financial buffer. Our new home loan and property purchase loan pages cover the general journey, and first home buyer loans explains how we help with harder cases. Investors can read about investment property loans.
How Ownright helps with off the plan purchases
Trevor Scott has seen plenty of buyers sign with a smile and sweat at settlement. We would rather you talk to us before the contract goes in. We stress test your numbers, explain what a valuation shortfall could mean and map out where the money would come from if it happened.
If a lender pulls back near settlement, we look at other lenders, restructuring or a short-term solution to bridge to a refinance. See our page on private loans for settlement gaps and bridging finance for how that works. We help buyers in every state and territory.
An illustration
Illustrative scenario only. A buyer signs for a new apartment and pays a deposit. Eighteen months later, the final valuation comes in below the contract price. A broker could check whether another lender values differently, whether available savings or family help cover the gap, or whether a short-term facility could bridge the difference until a refinance.
Mistakes to avoid
- Signing before checking borrowing capacity
- Taking on new debts between signing and settlement
- Forgetting the extra costs at settlement
- Relying on one lender’s pre-approval staying valid
- Ignoring the contract’s sunset and variation clauses
How should I think about the deposit and contract terms?
Contracts for off the plan homes often require a deposit at signing, with the balance due at settlement. The size of the deposit and where it is held are set out in the contract and by state law, so read them carefully with your conveyancer or solicitor. State regulators such as NSW Fair Trading publish general guidance on buying off the plan.
Also look closely at the sunset clause, which sets a date by which the building must be finished, and at any rights the developer has to vary the plans or the price. These clauses can affect both your finance timeline and your options if things go wrong.
Is an off the plan purchase different for investors?
Often it is. Investors may look at depreciation, rental demand and the likelihood of tenants once the building is complete, while lenders look at the same factors cautiously, especially in large apartment projects with many similar units. A conservative valuation is a real possibility, so investors should plan for a cash buffer. Our investment property loans page explains how lenders view rental income, and we can run an early check on how your portfolio looks to different lenders.
Documents to have ready
- Contract of sale and any amendments
- Photo ID
- Payslips, tax returns or business financials
- Savings and deposit evidence
- Statements for existing loans and cards
Our loan documents checklist has the full list.
Thinking about an off the plan purchase?
Share the contract details and your timeline and we will outline what the finance could look like. Prefer to talk? Call 03 7043 7233.
Looking for off the plan home loan finance?
Sounds like you want to buy off the plan with the finance already thought through. We are the lending experts in off the plan home loans, so click the button below and see if you qualify.
How it works, step by step
- 1
Step 1
Send us the contract or sales brochure before you sign if possible.
- 2
Step 2
We check how lenders handle the timeline, deposit and valuation risk.
- 3
Step 3
We keep in touch as settlement approaches and refresh your finance.
- 4
Step 4
We arrange the final approval, valuation and settlement.
Frequently asked questions
When do I apply for the loan on an off the plan purchase?
Often not until close to completion, because a lender's approval has a limited life and the final value is only known once the building is finished. Some buyers get an indicative assessment early for peace of mind. We can help you test borrowing capacity before signing the contract.
What happens if the property values lower than the contract price?
If the valuation at settlement is lower than the purchase price, the lender may lend against the lower figure, leaving you to cover the gap from savings or other sources. This is one of the main off the plan risks. We discuss ways to prepare for it, including keeping a buffer.
Can my circumstances changing affect approval?
Yes. A new job, a change in income, extra debts or a drop in credit score between signing and settlement can change the outcome. Lenders usually reassess you shortly before settlement. Staying steady and keeping us informed gives the best chance of a smooth finish.
Are there stamp duty concessions for off the plan purchases?
Some states and territories offer duty concessions, deferrals or exemptions for certain off the plan or new home purchases, and the rules change. Your state revenue office publishes current details, and your conveyancer or solicitor can confirm what applies to you.
Is a deposit bond useful for an off the plan purchase?
Sometimes. A deposit bond may replace a cash deposit on the contract, helping buyers who are waiting on funds. It has a cost and conditions, and not every developer accepts one. Check the contract and your cash plan before relying on it, and ask us how it interacts with your loan.
What if the lender declines near settlement?
It is stressful, but there can be ways through. We look at other lenders, adjusting the structure, adding security or short-term private finance to bridge to a refinance. The earlier you tell us, the more options exist, so contact us as soon as a problem appears.