Proven tips to secure a home loan for off-the-plan

Off-the-plan purchases settle months or years after you sign the contract, which means the loan you get approved for today might not be the loan you can access at settlement.

The main issue with off-the-plan finance is timing. Your borrowing capacity, the property valuation, and the lender's credit policy can all change between deposit and settlement. A pre-approval gives you a starting point, but it does not lock in your loan terms for 18 months. Understanding how to structure your application and manage the settlement period makes the difference between a smooth handover and a last-minute scramble for alternative funding.

Why lenders treat off-the-plan purchases differently

Lenders assess off-the-plan properties based on the contract price and a future valuation, not the current land value. If the property does not appraise at or above the contract price when it is built, you may need a larger deposit to meet the lender's loan to value ratio. Some lenders also apply stricter credit policies to off-the-plan purchases because the security does not exist yet, which increases their risk if your financial situation changes before settlement.

In Mandurah, off-the-plan apartment developments near the Mandurah Ocean Marina or townhouse projects in Halls Head are common examples where buyers secure finance early but settle 12 to 18 months later. The valuation at settlement depends on comparable sales at that time, not when you signed the contract.

Home Loan pre-approval for off-the-plan purchases

Pre-approval for an off-the-plan purchase typically lasts three to six months, but settlement might not occur for 12 to 24 months. You will need to reapply or extend your approval closer to settlement, which means your income, employment, and credit history will be reassessed. If your circumstances have changed or lending criteria have tightened, you may not receive the same approval.

Consider a buyer who secured pre-approval for an off-the-plan townhouse in Lakelands with a 10% deposit. Twelve months later, their employment moved from permanent to contract work. At settlement, the lender required a 15% deposit instead of 10% because contract income was assessed differently under updated policy. The buyer had to increase their deposit by several thousand dollars or find an alternative lender who would accept their income structure. Home Loan pre-approval provides conditional approval, but it is not a guarantee that extends indefinitely.

How valuations affect your loan amount at settlement

The property must be valued at or above the contract price for the lender to approve the full loan amount. If the valuation comes in lower, the lender calculates your loan based on the lower figure, which means you need to cover the shortfall with additional cash. This is a common issue in markets where construction takes longer than expected or where comparable sales have not increased as anticipated.

In a scenario like this, a buyer contracts to purchase an apartment in Mandurah for $450,000 with a 10% deposit. At settlement, the valuation comes back at $430,000. The lender will only provide 90% of $430,000, which is $387,000, instead of the expected $405,000. The buyer needs to find an extra $18,000 at settlement to cover the gap between the contract price and the reduced loan amount.

Structuring your deposit and managing cash flow before settlement

Most off-the-plan contracts require a 10% deposit, with 5% paid on exchange and the remaining 5% due within 30 to 90 days. You need to hold enough cash to cover both deposit stages, plus settlement costs when the property is complete. If you are also selling an existing property to fund the purchase, timing the sale to align with settlement is critical.

Some buyers use a construction loan structure if the property is still being built, which allows progressive drawdowns as the build advances. Others hold their deposit in an offset account linked to their current mortgage to reduce interest while waiting for settlement. The strategy depends on your cash position and whether you need to access equity from another property.

Fixed rate, variable rate, or split loan for off-the-plan

You typically choose your loan structure closer to settlement, not when you first apply. Interest rates may shift between pre-approval and settlement, so locking in a fixed interest rate too early can work against you if variable rates drop. A split loan allows you to fix part of your loan and keep the rest variable, which balances rate protection with flexibility.

If you expect to make extra repayments or access a redraw facility, a variable rate or split loan is more practical than a fully fixed loan. Fixed rate products often restrict additional repayments and charge break costs if you repay early. For owner occupied home loan purchases, the ability to make extra repayments can help you build equity faster once you move in.

What happens if your income or employment changes before settlement

Lenders reassess your application before final approval, which means any change to your income, employment, or credit file can affect your loan. If you have changed jobs, taken on new debt, or reduced your hours, the lender may withdraw or adjust your approval. This is particularly relevant for buyers with pre-approval who assume their loan is locked in.

If your circumstances change, update your broker as early as possible rather than waiting until settlement is imminent. Some lenders are more flexible with income changes than others, and switching lenders before settlement is easier than scrambling for alternative finance in the final weeks. A home loan application that reflects your current situation is more likely to settle without delay.

Lenders Mortgage Insurance and off-the-plan purchases

If your deposit is less than 20%, you will pay Lenders Mortgage Insurance. The LMI premium is calculated based on your loan amount and deposit size at settlement, not at pre-approval. If the valuation comes in lower or your deposit percentage drops, your LMI cost may increase. Some lenders allow you to capitalise the LMI premium into your loan, but this increases your total loan amount and affects your ongoing repayments.

For first home loan buyers using a government deposit scheme, LMI may be reduced or waived, but eligibility depends on the property price, location, and your income. Mandurah properties that fall within the scheme's price cap may qualify, but you need to confirm eligibility before signing the contract.

When to engage a broker for off-the-plan finance

Engage a broker before you sign the contract, not after. A broker can assess your borrowing capacity, identify lenders who are comfortable with off-the-plan purchases, and structure your application to account for the settlement delay. Some lenders have specific off-the-plan policies or require additional documentation, and knowing which lenders to approach saves time and reduces the risk of refusal.

A broker can also monitor your approval and prompt you to reapply or extend your pre-approval at the right time, rather than assuming the original approval will carry through to settlement. If you are purchasing in a new estate or development in Mandurah, such as those near the Peel region growth corridor, a broker familiar with local lenders and valuation trends can provide practical guidance on deposit size and loan structure.

Call one of our team or book an appointment at a time that works for you to discuss your off-the-plan purchase and confirm your loan structure before settlement.

Frequently Asked Questions