Top Strategies to Finance Off-the-Plan Investment Property

Structuring Finance Before the Deposit Contract

Off-the-plan purchases require loan approval in two stages. You need pre-approval before you sign the contract, then formal approval before settlement, which typically occurs 12 to 24 months later. The risk lies in that gap.

Consider a buyer who secures pre-approval for a two-bedroom apartment in Southport at $620,000 with a 10 per cent deposit. The contract settlement is scheduled for 18 months later. Between signing and settlement, DTI lending limits came into effect from 1 February this year, requiring lenders to cap high-ratio borrowing at 20 per cent of their investor loan book each quarter. If that buyer's total borrowing sits at six times income or above, they may find their original lender can no longer proceed at settlement because the quarterly allocation has been filled by other applicants. The solution is to secure formal approval early or work with a broker who monitors multiple lender pipelines and can pivot if capacity tightens.

Lenders assess investment loan applications at an interest rate buffer of 3.0 percentage points above the product rate. For a variable rate investor loan currently priced around 6.5 per cent, serviceability is tested at 9.5 per cent. That calculation determines whether you can proceed, not the rate you actually pay. If your income drops or expenses rise between contract and settlement, you may no longer meet that test even if rates have not moved.

Deposit Structures and Timing for Pre-Construction Contracts

Most off-the-plan contracts require a 10 per cent deposit, split into an initial payment on exchange and the balance within 90 days. That deposit sits in a trust account until settlement. It is not counted as equity by the lender until the property title is registered in your name.

If you are funding the deposit by releasing equity from an existing property, the lender will require a valuation of that property and confirmation that the loan to value ratio after the equity release remains within policy. For investor lending, most lenders cap LVR at 80 per cent without Lenders Mortgage Insurance and 90 per cent with LMI, though appetite at the higher end has contracted under the current DTI framework. Equity release typically takes three to four weeks from application to drawdown, so timing is critical if your contract requires the second deposit instalment within a fixed window.

Another funding path is to hold genuine savings in an offset account attached to your owner-occupied loan. The offset balance is not counted as a reduction in the loan amount when calculating LVR under APS 112, so the underlying loan exposure remains unchanged. You withdraw the offset funds to pay the deposit, which keeps your borrowing structure intact while you wait for settlement.

How the Sunset Clause Affects Your Loan Commitment

A sunset clause allows either party to terminate the contract if settlement has not occurred by a specified date, typically 24 to 36 months from exchange. Developers occasionally invoke this clause if property values have risen significantly since the original sale, allowing them to resell at a higher price. If that happens, your deposit is refunded but your loan pre-approval has likely expired and you are left without the asset.

From a financing perspective, the sunset date determines how long your pre-approval needs to remain valid or how many times you will need to reapply. Most lender pre-approvals last 90 days, with some extending to six months. For a contract with an 18-month settlement, you will need to refresh your approval at least twice. Each refresh involves a full income and liability review, and if your circumstances have changed, such as a job move, new personal debt, or a second investment property purchase, you may no longer qualify under the same terms. Keeping your broker informed of any material changes during the construction period allows for early adjustment rather than a settlement-day failure.

Tax Treatment and Holding Costs During Construction

Once the contract is signed, you do not own the property and cannot claim any deductions until settlement. Interest on funds borrowed to pay the deposit is not deductible because the asset is not yet generating income. Some buyers structure a separate loan for the deposit and capitalise the interest until settlement, at which point the total debt is refinanced into a standard investment loan and interest becomes deductible.

After settlement, interest and other holding costs such as body corporate fees, council rates, and property management fees are deductible against rental income. If the property has not yet been tenanted, those costs are still deductible provided the property is genuinely available for rent. For properties acquired after 7:30pm AEST on 12 May this year, losses can only be offset against other residential property income from the 2027-28 income year onward unless the property qualifies as an eligible new build. An eligible new build includes dwellings constructed on previously vacant land or developments that increase the total number of dwellings on the site. Off-the-plan apartments in new towers typically meet this definition, which means you retain full negative gearing and the choice between the 50 per cent CGT discount or cost base indexation when you eventually sell. Knock-down rebuilds that do not increase dwelling numbers do not qualify, nor do substantial renovations of existing stock.

Under the new provisions, if your off-the-plan apartment is classified as an eligible new build, interest and other deductible costs can continue to be offset against salary, business income, and other assessable income in the same way they have been historically. For buyers targeting long-term portfolio growth rather than immediate cash flow, this makes a material difference to after-tax holding costs in the early years.

Lender Appetite for Off-the-Plan Security

Not all lenders will accept off-the-plan property as security. Those that do typically apply a reduced valuation at settlement, often discounting the contract price by 10 to 20 per cent depending on the level of construction completion and the degree of pre-sales in the development. If the lender's valuation at settlement comes in below your contract price, your LVR rises and you may be required to provide additional deposit funds to keep the loan within policy.

In our experience, this occurs more frequently in precincts with high levels of new apartment supply. Broadbeach and Surfers Paradise have seen significant off-the-plan stock come to market over the past two years, and lender valuations in these areas have been more conservative than in established unit markets. The valuation is ordered by the lender after you submit your formal loan application, usually four to six weeks before settlement. If the valuation falls short, your options are to inject more cash, seek a different lender with a higher risk appetite, or negotiate a price reduction with the developer. The third option is rarely successful once contracts are exchanged.

Working with a broker who maintains relationships across multiple lender panels allows you to identify which institutions are currently lending into your specific development and at what valuation assumptions before you exchange contracts. Some lenders maintain internal watchlists of developments or postcodes where they will not lend or will lend only at heavily discounted LVRs. That information is not published but is known to brokers who track credit policy changes across the panel.

Settlement Risk and Final Loan Approval

Formal loan approval is subject to a satisfactory valuation, final income verification, and a clear title search. For off-the-plan purchases, the title does not exist until the development is registered with the relevant state land title office, which occurs after construction is complete and the occupation certificate is issued. Your solicitor or conveyancer will conduct a title search once the plan is registered, and the lender will require confirmation that there are no encumbrances or defects before proceeding to settlement.

Delay in title registration is common. Developers may face construction delays due to weather, labour shortages, or defect rectification requirements from the certifier. Each month of delay extends your holding period without the ability to generate rental income, and if your pre-approval expires during that period, you face the cost and uncertainty of reapplying. Some lenders have tightened credit policy during the construction window, particularly around DTI settings and interest-only approval, which means a loan that was pre-approved 18 months ago may not be available on the same terms today even if your personal circumstances have not changed.

If you are purchasing an off-the-plan investment property on the Gold Coast and construction completion is pushed beyond the sunset date, the contract may be terminated. You recover your deposit, but you also lose the opportunity cost of that capital and any price appreciation that would have occurred had the property settled on time. Developers are required to provide regular construction updates, and your solicitor should be monitoring progress against the contract timeline. If delays appear likely, early engagement with your broker allows you to refresh loan documentation in advance rather than waiting until the week before settlement.

Call one of our team or book an appointment at a time that works for you. We work with property investors across the Gold Coast who are expanding their portfolio through off-the-plan acquisitions, and we structure funding to manage the settlement risk, regulatory changes, and lender policy shifts that occur during the construction period.

Frequently Asked Questions