Proven tips to secure a home loan for off-the-plan property

Off-the-plan purchases settle months or years after contract signing, which means your loan pre-approval needs to account for a lender's valuation at completion rather than today's contract price.

The contract price you agree to today might exceed the property's value when construction finishes. If you sign a contract for an apartment in Footscray at $550,000 and the lender values it at $510,000 when the building is complete 18 months later, you would need to find the $40,000 shortfall in cash before settlement. This gap becomes your problem unless your loan structure anticipates it from the start.

Why lenders value off-the-plan properties at settlement

Lenders assess off-the-plan purchases based on the property's value when construction is complete, not the contract price. The contract you sign reflects today's market conditions and the developer's pricing strategy. The valuation at settlement reflects the actual market at completion, and if construction delays, oversupply, or broader market shifts occur during that period, the valuation can fall short of your contract price.

Consider a buyer who contracts for a two-bedroom apartment in Brunswick at $635,000 in late 2026, with settlement expected in mid-2028. When the building completes, the lender orders a valuation and it comes back at $590,000. The buyer now needs $45,000 in additional cash at settlement to close the gap between the loan the lender will approve and the contract price, plus the costs already budgeted for stamp duty and settlement fees. Without that cash, the contract defaults.

Pre-approval timing for off-the-plan contracts

Most lenders issue pre-approval for six months, but off-the-plan settlements occur 12 to 36 months after signing. Your pre-approval will expire well before settlement, and you will need to reapply closer to completion. The income, employment status, credit profile and lending standards that applied when you first signed may all change before settlement.

Your application at settlement is assessed as a new loan. If you change jobs, take parental leave, or acquire new debt during construction, your borrowing capacity at settlement may fall below what it was at contract signing. A buyer purchasing an apartment in Heidelberg with settlement due in 2028 might be earning $95,000 at contract signing, but if they reduce to part-time work or take a career break during construction, they may no longer meet serviceability at settlement. This is why we structure loan pre-approval to account for realistic changes in your circumstances over the construction period, not just your position today.

Loan to value ratio caps and LMI on off-the-plan purchases

Most lenders cap off-the-plan loans at 90 per cent LVR for owner-occupiers and 80 per cent for investors. A 90 per cent loan on a contract price of $635,000 requires a $63,500 deposit plus stamp duty and settlement costs. If the valuation at settlement comes in at $590,000, the lender will only approve a loan of $531,000 at 90 per cent LVR, leaving you short by $40,500 against the contract price.

Lenders Mortgage Insurance applies to off-the-plan loans above 80 per cent LVR in the same way it applies to established homes, but the premium is calculated on the valuation at settlement, not the contract price. If the valuation falls below your contract price, your LMI premium may be lower than expected, but your cash requirement at settlement will increase.

Variable, fixed and split rate options for off-the-plan loans

You select your loan structure at settlement, not at contract signing. When you sign the off-the-plan contract, you are committing to the purchase price and deposit terms. When you settle 18 or 24 months later, you choose whether to lock in a fixed rate, take a variable rate, or use a split loan structure based on the rates available at that time.

A buyer contracting for an apartment in Ascot Vale in late 2026 with settlement in early 2028 has no way of knowing what fixed rates will be offered in 2028. If fixed rates rise during construction, a variable rate may become the more suitable option at settlement. If fixed rates fall, locking in a portion of the loan could provide stability during the first years of ownership. The decision is made at settlement when the terms are known, not when the contract is signed.

Sunset clauses and loan implications

A sunset clause allows either party to terminate the contract if construction is not completed by a specified date. Developers sometimes extend sunset dates through contract variations, and buyers who agree to an extension remain bound to settle even if market conditions or their financial position have deteriorated.

If a developer extends a sunset clause from mid-2028 to late 2028, and the buyer's income or employment has changed during that period, they may no longer qualify for the loan they were pre-approved for in 2026. The contract remains enforceable, but the buyer's capacity to settle does not. We regularly see this scenario with projects in growth corridors including South Morang and Bundoora, where buyers agreed to extensions without confirming their borrowing capacity would still support settlement at the new date.

Using state schemes for off-the-plan purchases

The Victorian first home buyer stamp duty concession provides a full exemption on new homes valued up to $600,000 and a partial concession on properties between $600,001 and $750,000. Buyers must move into the property within 12 months of settlement and live there for at least 12 continuous months. The $10,000 Victorian First Home Owner Grant applies to new homes valued up to $750,000.

The Australian Government 5% Deposit Scheme accepts off-the-plan purchases, but both the contract price and the lender's valuation at settlement must fall within the applicable property price cap. In Victoria, that cap is $950,000 for Melbourne and regional centres including Geelong, and $650,000 for other areas. A buyer contracts for a new apartment in Preston at $920,000, within the cap. If the valuation at settlement comes back at $880,000, the buyer can still access the scheme because both figures are within the $950,000 threshold. If the valuation exceeds $950,000, the scheme does not apply and the buyer must meet the lender's standard deposit requirements without the government guarantee.

Deposit structures and progress payments

Most off-the-plan contracts require a 10 per cent deposit, with 5 per cent due at contract signing and 5 per cent within 30 to 90 days. Some contracts include progress payments tied to construction milestones. Each progress payment reduces the loan amount you need at settlement, but also requires additional cash during construction.

A contract for an apartment in Reservoir at $960,000 with a 10 per cent deposit and two progress payments of 5 per cent each requires $96,000 upfront, $48,000 at slab stage, and $48,000 at lock-up stage, for a total of $192,000 before settlement. If your savings plan assumed only the initial $96,000 deposit, the progress payments will force you to find an additional $96,000 during construction or risk defaulting on the contract. This structure is less common in Melbourne apartment projects than in townhouse developments, but it appears often enough that checking the payment schedule before signing is essential.

Off-the-plan contracts as investment purchases

Investors purchasing off-the-plan face the same valuation risk as owner-occupiers, but with lower maximum LVR limits. Most lenders cap investment loans for off-the-plan purchases at 80 per cent, requiring a 20 per cent deposit. If the property is valued below the contract price at settlement, the investor must cover the shortfall in cash.

An investor contracting for a two-bedroom apartment in Doncaster at $560,000 with an 80 per cent LVR loan needs a $112,000 deposit. If the valuation at settlement is $520,000, the lender approves a loan of $416,000, leaving the investor short $32,000 against the contract price. That shortfall must be paid in cash at settlement or the contract defaults. We structure investor pre-approvals with enough buffer to absorb a 5 to 10 per cent valuation gap, which means starting with a deposit higher than the contract minimum.

Choosing a lender for off-the-plan purchases

Not all lenders handle off-the-plan purchases the same way. Some lenders exclude certain postcodes or building types from their off-the-plan lending panels, particularly in areas with high apartment supply such as Melbourne's CBD or Footscray. Others apply loading to interest rates for off-the-plan loans, or require larger deposits than they would for established properties.

Your choice of lender matters at contract signing, not just at settlement. If you obtain pre-approval with a lender that later declines to value the completed building due to oversupply concerns or changes to their postcode policy, you will need to find a different lender at settlement under time pressure. Matching the lender's appetite to the specific building and location before signing protects you from that scenario. We assess lender panels for off-the-plan appetite before recommending a structure, which means checking not only the rate and features but also whether that lender will still support the loan when the building is complete.

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