Off-the-Plan and What First Home Buyers Forget

Buying off-the-plan means you commit to a contract today for a property that will not be built for another 12 to 24 months.

That delay changes how lenders assess your application, how much deposit you need to save, and when you can actually access grants and concessions. Most buyers focus on the sticker price and the grant, but the real decisions happen at settlement when valuations, lending policy, and your financial position all need to align.

How Lenders Assess Off-the-Plan Purchases Differently

Lenders approve your loan based on your income and financial position at the time of settlement, not at the time you sign the contract. When you apply for pre-approval on an off-the-plan property, the lender issues conditional approval valid for three to six months, but the actual loan does not settle until construction finishes. If your income drops, your employment changes, or lending policy tightens in that period, the original approval may not hold.

Valuations also happen at settlement, not at contract. If the completed property values below the contract price, the lender will only provide a loan based on the lower valuation. You will need to cover the difference in cash or renegotiate with the developer. In our experience, valuation shortfalls of 5% to 10% are not uncommon in softening markets, particularly when multiple off-the-plan projects in the same precinct settle around the same time.

Consider a buyer who signs a contract for a two-bedroom apartment in a new development near Beenleigh station. The purchase price is within their borrowing capacity at the time of contract, and they plan to use the First Home Guarantee to buy with a 5% deposit. Eighteen months later, the project completes, but the bank's valuation comes in 8% below contract price. The buyer now needs to find an additional amount in cash or the lender will not settle the loan. That scenario is why off-the-plan purchases require a deposit buffer beyond the minimum and a plan to hold your financial position steady through to settlement.

When You Can Access the Queensland First Home Owner Grant

The $30,000 Queensland grant for new homes is available at settlement, not at contract. If you sign a contract before 30 June 2026 but settlement occurs after that date, you may not be eligible unless the grant has been extended. At the time of writing, the grant is legislated until 30 June 2026, so buyers purchasing off-the-plan need to confirm both the expected settlement date and the status of the grant at that time.

You can apply for the grant through your conveyancer or solicitor before settlement. Funds are typically paid at settlement and can be used to reduce your loan amount or cover other settlement costs, but you cannot use the grant as part of your initial deposit unless the developer and lender have a specific arrangement in place. Most off-the-plan contracts require a 10% deposit within 14 days of signing, which means you need to have genuine savings or gifted funds available upfront.

Deposit Structure and the Sunset Clause Risk

Off-the-plan contracts typically require a 10% deposit, often paid in stages: 5% on exchange and the remaining 5% within 30 to 90 days. If the contract includes a sunset clause and the developer cancels the contract because construction has not completed by that date, your deposit is refunded but you lose the time and any market opportunity cost. Sunset clauses are common and usually set 24 to 36 months from the contract date.

If property values have risen during that period and the developer can re-sell at a higher price, they may choose to trigger the sunset clause. You receive your deposit back, but you are now priced out of the market. If values have fallen, you remain locked into the original contract price, which may be higher than the completed property is worth. That asymmetry is the key risk in off-the-plan purchases and it compounds if your deposit is the absolute minimum required.

For buyers in Mount Warren Park looking at new developments in neighbouring Yarrabilba or Flagstone, this matters because those growth corridors are seeing multiple projects launched in close succession. Holding a larger deposit buffer and securing loan pre-approval that accounts for potential valuation shortfalls reduces the risk of walking away from your deposit or being unable to settle.

Stamp Duty Timing and Pre-Construction Concessions

Queensland offers a full stamp duty concession on new homes purchased before construction is complete, provided the property is valued under the relevant threshold. For off-the-plan purchases, this concession applies if you enter the contract before construction finishes, which is almost always the case. Combined with the first home buyer stamp duty concession, eligible buyers can reduce duty to nil on properties up to a certain value.

Stamp duty is calculated at settlement, not at contract, so you do not pay duty upfront. However, you need to factor duty into your settlement costs if you are not eligible for the full concession or if the property value exceeds the threshold. Your conveyancer will calculate the final duty payable based on the contract price or valuation, whichever is higher, and you will need those funds available at settlement alongside other costs such as registration fees, legal fees, and any adjustment for council rates or body corporate levies.

How Income Changes Between Contract and Settlement Affect Approval

Because home loan applications are reassessed at settlement, any change in your income, employment status, or credit profile can affect final approval. If you move jobs, take parental leave, or reduce your hours between contract and settlement, the lender may withdraw or adjust the original approval. Some lenders allow you to update your application with new employment details if you remain in the same industry and income bracket, but others will treat it as a new application.

This is particularly relevant for buyers using government schemes like the First Home Guarantee, which have specific eligibility criteria that are checked again at settlement. If your income exceeds the threshold by the time the loan settles, or if you no longer meet the residency or citizenship requirements, you will lose access to the scheme and may need to increase your deposit to cover Lenders Mortgage Insurance.

Interest Rate Lock and Fixed Rate Availability at Settlement

When you apply for a loan on an off-the-plan property, you do not lock in an interest rate at pre-approval. Rates are set at settlement, which could be 12 to 24 months after you sign the contract. If rates have increased in that period, your borrowing capacity may have decreased, even if your income has stayed the same.

Some lenders offer a rate lock facility for off-the-plan purchases, allowing you to lock in a fixed interest rate up to 12 months before settlement. This can provide certainty, but it also means you miss out on any rate cuts during that period. The decision to lock or float depends on your view of the rate cycle and your tolerance for uncertainty at settlement.

For buyers relying on tight borrowing capacity, the rate at settlement determines whether the loan proceeds or not. A 1% increase in rates can reduce borrowing capacity by around 10%, which may be the difference between settling the contract and defaulting.

What Happens If You Cannot Settle

If you are unable to settle because your loan is not approved, your income has changed, or the property does not value, you forfeit your deposit and may be liable for additional damages if the developer re-sells the property at a lower price. Most off-the-plan contracts are unconditional, meaning you cannot withdraw without penalty once the cooling-off period has passed.

This makes pre-settlement planning critical. You should confirm loan approval, valuation expectations, and settlement funds at least 60 days before the scheduled settlement date. If there is any uncertainty, speak with your broker or lender early so you have time to adjust the structure, increase your deposit, or switch lenders if needed.

Call one of our team or book an appointment at a time that works for you. We work through deposit structures, grant eligibility, and settlement planning with first home buyers across Mount Warren Park, Logan Village, and surrounding areas who are buying off-the-plan and want to make sure everything aligns before settlement.

Frequently Asked Questions