The Easiest Way to Finance an Off-the-Plan Investment

Buying an off-the-plan investment property means arranging finance now for a property that won't settle until construction completes, often 12 to 24 months later.

That gap creates specific challenges around loan approval timing, valuation at settlement, and how lenders assess rental income before the property exists. The recent changes to capital gains tax and negative gearing announced in the May Budget also create a clear advantage for new builds over established properties, making off-the-plan purchases more attractive from a tax perspective.

How Presale Lending Approval Works

Most lenders will give conditional approval when you exchange contracts, but that approval expires after 90 to 120 days.

Your investment loan application needs to be refreshed closer to settlement, which means your income, credit position, and borrowing capacity will be reassessed when the property is actually ready. If your circumstances change during construction, such as a job change, new debts, or a reduction in income, the loan may no longer be approved at settlement. Some lenders also apply a different serviceability buffer or policy at reapproval, which can reduce the amount you're able to borrow even if nothing in your situation has changed.

Consider a buyer who contracts to purchase a two-bedroom apartment off the plan with a 10% deposit and conditional approval for the remaining 90% of the purchase price. Eighteen months later, when the property is ready to settle, they've changed employers and their new role includes a lower base salary with performance-based commission. The lender reassesses and determines the variable income doesn't meet their policy for new customers, so the original approval is withdrawn. The buyer either needs to find another lender quickly or risk losing their deposit.

Valuations at Completion and Loan to Value Ratio

The valuation that matters for your loan is the one completed at settlement, not the contract price you agreed to pay.

If the property is valued below the contract price, your lender will use the lower figure to calculate your loan amount. That means you may need to bring additional funds to settlement to cover the shortfall, even if you originally planned to borrow 90%. This is common when a development is slow to sell, the local market softens during construction, or when comparable sales in the same building come in lower than expected. Your deposit percentage is recalculated based on the valuation, not the contract price, so a property purchased at $600,000 but valued at $550,000 means your 10% deposit is now effectively only 9.2% of the contract price, and you'll need to find the extra $50,000 plus the additional amount required to meet the lender's minimum deposit requirement.

Rental Income Assessment Before Settlement

Lenders won't include rental income in your serviceability until the property is completed and tenanted, or at minimum until a lease is signed.

That creates a timing issue if you're borrowing close to your maximum capacity. The investment loan amount you can service is calculated without rental income at the point of formal approval, even though the property will eventually generate income once it settles. Some lenders will allow you to use a rental assessment from a licensed property manager as evidence of expected income, but that's not the same as actual rent being received. If you're relying on the rental income to meet repayments after settlement, you'll need to demonstrate that you can service the loan on your personal income alone until a tenant is in place.

Tax Treatment for New Builds Under the Latest Budget Changes

From 1 July 2027, investors who purchase established residential properties after 12 May 2026 will no longer be able to claim negative gearing losses against wage income, and the 50% capital gains tax discount will be replaced with inflation indexing and a minimum 30% tax on gains.

New builds, including off-the-plan purchases contracted after Budget night, are excluded from the negative gearing restriction entirely. You'll still be able to offset losses from a new build against your other income, and you'll also have the option to choose between the old 50% CGT discount or the new inflation-based method when you eventually sell, whichever delivers the lower tax. That means off-the-plan properties contracted now will retain both the full negative gearing deduction and a choice of CGT treatment, making them significantly more attractive than purchasing an established property for building wealth after separation.

Interest Only Periods and Cash Flow During Construction

Most investors purchasing off the plan will structure their loan as interest only to reduce holding costs during the early years of ownership.

An interest only investment loan allows you to claim the full interest expense as a deduction while keeping repayments lower, which improves cash flow if the property is negatively geared. The interest only period is typically available for five years from settlement, and you'll need to specify this structure at the time of loan approval. Once the interest only period ends, the loan reverts to principal and interest repayments, which increases your monthly cost but begins to reduce the debt. Some lenders restrict interest only periods on higher LVR loans, particularly if Lenders Mortgage Insurance is required, so this should be confirmed during the approval process.

Deposit Requirements and Funding the 10% at Exchange

Most off-the-plan contracts require a 10% deposit at exchange, with the balance due at settlement.

That 10% must come from genuine savings, equity in another property, or a family guarantee, and it cannot be borrowed as part of the investment property loan itself. If you're using equity release from an existing property, you'll need that loan approved and funds available before exchanging contracts. If you're planning to use genuine savings, the lender will require evidence that the funds have been held in your account for at least three months, and they'll also ask for proof of how the funds were accumulated. Gifted deposits are generally not accepted for investment purchases, and funds sourced from a redraw on an existing loan may not be treated as genuine savings depending on the lender.

When to Reapply and Lock In Your Rate

You'll typically reapply for formal approval around three to six months before the expected settlement date, once the developer confirms a practical completion timeline.

At that point, you can lock in a fixed rate if you want certainty on repayments, or proceed with a variable rate and retain flexibility to make extra repayments or refinance without penalty. Fixed rates are locked for a maximum of 90 days in most cases, so timing this correctly is important. If settlement is delayed beyond your rate lock period, you'll revert to the current variable rate until settlement occurs, and you may not be able to re-fix at the same rate. Your broker can help coordinate the reapproval and rate lock timing once the developer provides a firm completion date.

Call one of our team or book an appointment at a time that works for you. We'll walk through your deposit structure, loan options, and how the recent tax changes apply to your specific purchase, so you can move forward with confidence.

Frequently Asked Questions