Off-the-plan purchases can be attractive for first home buyers: a new home, possible eligibility for the First Home Owner Grant, stamp duty concessions, and a long settlement period to keep saving. But there's a gap of one to three years between signing and settling, and a lot can change in that time.
Here's what to watch from a finance perspective.
How off-the-plan works
You sign a contract and pay a deposit, often 10%, before the building is finished. The deposit is usually held in trust. You don't need your full loan until the building is complete and ready to settle.
The finance risks
1. Your pre-approval won't last
Pre-approvals usually last around 90 days. You can't get a loan approved today for a settlement two years away. Your formal approval happens closer to completion, under the lending rules and interest rates at that time.
Rates are a good example. Anyone who signed off the plan in 2024 expecting lower rates by settlement found the cash rate rose four times in 2026, to 4.60%. Higher rates can mean lower borrowing power.
2. The valuation might come in low
At settlement, the lender values the property. If the market has softened, or the developer's price was optimistic, the valuation may be below what you paid.
Example: you agreed to pay $650,000. The valuer says it's worth $610,000. The lender lends based on $610,000, so you need to find the $40,000 difference in cash.
With Sydney values down 7% in the year to September 2026 according to Cotality, this is a real risk for anyone settling now.
3. Your circumstances change
New job, a baby, a separation, or a new car loan can all affect whether you're approved at settlement. Treat the time between signing and settling as if you're still applying.
4. Lender restrictions on new apartments
Some lenders limit lending on new apartments in high-density areas, or on small units. Check which lenders will finance your specific development before you sign.
Sunset clauses
A sunset clause lets either party end the contract if the building isn't finished by a certain date. In NSW, developers can't use the sunset clause to rescind without your consent or a court order, which protects buyers from developers cancelling to resell at higher prices.
If the contract is rescinded, you get your deposit back, but you may have missed out on market growth or other opportunities in the meantime.
The upside for first home buyers
- First Home Owner Grant: in NSW, $10,000 for new homes up to $600,000
- Stamp duty: NSW first home buyers pay no duty up to $800,000
- Time: extra months to keep saving or build up your FHSS balance
- Brand new: fewer maintenance costs early on, and builder warranties
How to protect yourself
- Get a broker to check your borrowing power with a buffer for higher rates before you sign.
- Ask which lenders will finance the development. We can check this.
- Use a deposit bond if you'd rather keep cash in an offset or savings account.
- Keep extra savings to cover a possible valuation shortfall. 5% to 10% of the price is sensible.
- Avoid new debt until you've settled.
- Get your solicitor to review the contract, especially sunset dates, defect provisions and what you're allowed to change.
- Research the developer and builder. Look at past projects and any defect history.
Frequently asked questions
Can I use the 5% Deposit Scheme for off-the-plan?
Yes, but the scheme guarantee is arranged near settlement, and the price cap applies to the contract price. Speak to us early so it's planned for.
What if I can't get finance at settlement?
You could lose your deposit and be sued for any loss the developer suffers on resale. That's why planning for valuation and rate changes matters.
Is an off-the-plan valuation done before I sign?
No. The lender's valuation happens near completion. Some buyers get an independent valuation beforehand for peace of mind.
Considering an off-the-plan purchase? Call Finfident on 02 6416 2142, or Call, Text or WhatsApp 0424 545 654 before you sign. We'll stress-test your finance against higher rates and a lower valuation.
Want to know if this applies to you?
Talk it through with a Finfident broker. It's free and there's no obligation.
