Key takeaways
- You buy off plans and pay a deposit now; you settle and pay the balance once it’s built.
- The key risk is a valuation gap — a settlement valuation below your contract price.
- Formal finance is usually arranged near completion, not locked in for the whole wait.
- Keep your finances stable across the long gap so approval holds at settlement.
Off-the-plan buying is a leap of a particular kind: you commit to a price today for something you’ll receive in a year or two. Done well, you can secure a new property and let time work for you. Done without understanding the finance risks, you can arrive at settlement with a gap you didn’t plan for. The difference is knowing what you’re signing up to.
How it works
You sign a contract and pay a deposit — often 10% — based on plans and specifications, before construction. The balance isn’t due until the build is finished and settlement occurs, which can be well over a year away. Crucially, your loan is generally arranged close to settlement, because most lenders will only formally approve once the property exists and can be valued.
The valuation-gap risk
This is the big one. Lenders lend against the property’s valuation at settlement, not the price you agreed earlier. If the market softens or the finished property values below your contract price, you may have to make up the difference in cash. It’s the same principle as our low valuation guide, but amplified by the long wait.
Illustrative example. A buyer who contracts to pay $600,000 off the plan, but whose apartment is valued at $560,000 at settlement, may face a $40,000 gap — because the lender lends against the $560,000 valuation. The buyer needs to cover the shortfall. This is the central risk to plan for; outcomes vary with the market.
Because settlement can be far off and pre-approvals typically last around 90 days, you usually can’t lock finance for the whole period. Keep your income, debts and spending stable across the wait, and stay in touch with your broker — a change in your circumstances or lender policy near settlement is a common trap.
Other things to weigh
Construction delays, changes to your circumstances or rates over the long gap, and the finished product differing from the brochure are all real. On the upside, you may access new-build grants and stamp duty concessions, and some lenders are cautious on high-density apartments — so lender choice matters. Weigh it all before you commit.
Broker Insight. The risk we most often flag with off-the-plan is the valuation gap at settlement — sometimes a year or more away. Keeping your finances stable across that wait is as important as the contract itself.
Thinking off the plan? Plan the finance first
We’ll help you understand the valuation risk, keep your finances settlement-ready across the wait, and match you to a lender comfortable with the property. Free, no obligation.
Book your free game plan callFrequently asked questions
How does buying off the plan work?
You sign a contract and pay a deposit (often 10%) to buy a property — usually an apartment or townhouse — based on plans, before it’s built. You don’t settle or pay the balance until construction is complete, which can be a year or more later. Your finance is generally arranged closer to settlement, because most lenders will only formally approve a loan when the property is near completion and can be valued.
What are the risks of buying off the plan?
The main finance risk is a valuation gap: if the property is valued at less than your contract price at settlement, you may need to cover the shortfall, because lenders lend against the valuation, not the price. Other risks include interest-rate or personal-circumstance changes over the long wait, construction delays, and the finished product differing from expectations. Planning for these is essential.
Can I get pre-approval for an off-the-plan purchase?
You can get an indication of your borrowing capacity, but formal approval usually can’t be locked in for the whole period, because lenders approve close to settlement once the property can be valued. Because pre-approvals typically last around 90 days and settlement may be far off, it’s important to keep your finances stable and stay in touch with your broker across the wait so there are no surprises at the end.
This guide is general information only and does not take your personal circumstances into account. It is not financial or credit advice. Government schemes, lender policies, rates and tax rules change over time and eligibility criteria apply. Speak with us for advice tailored to your situation.