Top tips to buy an off-the-plan property with ADF loans

Off-the-plan purchases lock in a price today for a property that may not settle for 12 to 24 months.

The deposit you provide at contract signing sits in trust while the development is completed. Your loan approval needs to remain valid through to settlement, and the finished property must meet your lender's valuation requirements when the time comes. For ADF members posted to Queensland or planning to invest there, this structure can work well if the approval is set up correctly from the start.

Pre-approval needs to cover the settlement date

Most standard home loan pre-approvals expire after 90 days. Off-the-plan settlements typically occur 12 to 24 months after contract exchange. Your lender needs to assess the loan on the basis that rates, serviceability policy, and your income may all change before settlement arrives.

In our experience, lenders who regularly handle off-the-plan loans will issue a conditional approval that extends to the expected settlement date, subject to periodic income verification and policy reviews. If your posting changes or your income structure shifts during the construction phase, the lender reassesses serviceability at that point. Some lenders require formal reconfirmation six months before settlement, while others check only at the 30-day mark.

Consider a buyer who signs a contract in September for an apartment due to settle in 18 months. If that buyer receives a posting notice in month 10, the lender will want updated payslips and confirmation that the property will be used as intended, whether owner-occupied or as an investment. If the buyer originally applied for an owner-occupied loan but now plans to rent the property due to the posting, the loan structure and rate may need adjusting before settlement.

The 10% deposit requirement and how it works

Most off-the-plan contracts require a 10% deposit at exchange, though some developers accept 5% with the balance due at settlement. The deposit is held in a trust account and released to the developer in stages as construction progresses, subject to the terms of the contract and relevant state legislation.

Queensland's First Home Owner Grant of $15,000 applies to new homes valued under $750,000 for contracts signed from 1 July 2026. The full transfer duty concession on new homes has no price cap for contracts signed on or after 1 May 2025, reducing duty to nil on the residential land component. If you are purchasing your first home and the contract value falls within the grant threshold, the $15,000 can form part of your deposit, though it is not released until settlement.

If you are using the Australian Government 5% Deposit Scheme, which allows eligible first home buyers to purchase with a deposit of as little as 5% of the property value with Housing Australia providing a guarantee to the lender, the property price must fall within the applicable cap. In Queensland, the cap is $1,000,000 in capital cities and regional centres including Gold Coast and Sunshine Coast, and $700,000 in other areas. Both the contract price and the lender's final valuation at settlement must meet this threshold.

For ADF members, no LMI loans may be available through select lenders, allowing you to borrow above 80% LVR without paying lenders mortgage insurance. This can reduce the cash deposit required at exchange, though the 10% deposit structure in the contract still applies.

Valuation risk and what happens if the property falls short

The lender will order a valuation once the property reaches practical completion, typically 30 to 60 days before settlement. If the valuation comes in below the contract price, the lender will only advance funds based on the lower figure. You are required to make up the shortfall in cash at settlement.

As an example, if you signed a contract for $650,000 and the valuation at completion is $620,000, the lender will calculate your loan based on $620,000. If you had a 10% deposit, your loan amount was expected to be $585,000. With the valuation at $620,000, the loan amount falls to $558,000. You need to bring an additional $27,000 in cash to settlement to cover the gap between the contract price and the reduced loan amount.

This scenario occurs more often in markets where prices have softened between contract signing and settlement, or where the development has not progressed as anticipated. Buyers who rely entirely on the loan amount to fund the purchase without holding a cash buffer can find themselves unable to settle. The developer may pursue damages or retain the deposit if settlement does not proceed.

Lenders assess off-the-plan valuations using comparable sales of completed properties in the area, adjusted for the specific features of the development. If the development is in a precinct with limited comparable sales data, or if the market has shifted, the valuation may reflect a more conservative view than the contract price. For developments in areas such as the Gold Coast or Sunshine Coast where apartment supply has been high, this risk has been more pronounced in recent cycles.

Loan structure and whether to fix or split

You can lock in a fixed rate at contract signing, but the rate will not apply until settlement. Most lenders allow you to choose your rate structure within 30 to 90 days of settlement, depending on the lender's policy.

If you fix the rate too early and settlement is delayed, you may be locked into a rate that no longer suits the market. If you wait until settlement is imminent, you have more current information but less certainty. A split loan structure that combines a portion of fixed and variable debt gives you partial rate certainty while retaining flexibility on the variable portion.

For ADF members who may face posting changes during the construction period, the variable portion of a split loan allows you to make additional repayments or redraw funds without incurring break costs. If the property was originally intended as your home but becomes an investment due to posting, the offset account linked to the variable portion continues to reduce interest on that segment of the loan.

Sunset clauses and construction delays

Most off-the-plan contracts include a sunset clause, which allows either party to terminate the contract if settlement has not occurred by a specified date. In Queensland, the buyer has the right to terminate if the sunset date passes and the developer has not reached practical completion, unless the developer applies to the Supreme Court for an extension and the court approves.

If the contract is terminated under the sunset clause, your deposit is returned in full. Your loan pre-approval will have expired, and you will need to start the process again if you wish to purchase another property. If the developer terminates under the sunset clause, the same outcome applies, though in a rising market this may disadvantage the buyer if the property has increased in value.

Construction delays can occur due to weather, labour shortages, or supply chain issues. If the delay pushes settlement beyond your loan pre-approval period, you will need to reapply or have the lender reconfirm your approval. If your income or circumstances have changed, this may affect your borrowing capacity or loan structure. Keeping your broker informed of any posting changes or income shifts during the construction phase allows them to liaise with the lender and manage the reconfirmation process in advance of settlement.

Interest-only loans for off-the-plan investment purchases

If you are purchasing the property as an investment, an interest-only loan structure may reduce your repayments during the period when you are still establishing rental income or managing holding costs. Interest-only terms are typically available for five years, after which the loan converts to principal and interest repayments unless you refinance or negotiate a further interest-only period.

Under Prudential Standard APS 112, a long-term interest-only residential loan is classified as non-standard where the LVR is greater than 80 per cent and the contractual interest-only period is greater than five years or is not specified. For ADF members using a no-LMI loan or standard lending above 80% LVR, the loan structure must comply with the lender's prudential requirements, which may limit the availability of interest-only terms at higher LVRs.

For buyers intending to rent the property while living elsewhere, an interest-only loan can improve cash flow during the early years of ownership, particularly if the property is negatively geared. Rental income offsets a portion of the interest cost, and the loan structure allows you to hold the property without requiring principal repayments during the period when your income may be stretched across both rent and mortgage commitments.

What happens if your circumstances change before settlement

If you receive a posting notice, your income changes, or your relationship status shifts during the construction period, your lender will reassess your application before settlement. This reassessment occurs either at the six-month mark or within 30 days of settlement, depending on the lender.

If your income has increased or remained stable and your employment status has not changed, the reassessment is typically straightforward. If your income has reduced or your living situation has changed, such as a separation or additional dependents, the lender may reduce your approved loan amount or require additional security.

If the lender reduces the loan amount and you cannot make up the shortfall, you may be unable to settle. The developer may retain the deposit or pursue damages depending on the contract terms. For this reason, keeping your broker informed of any material changes during the construction period allows them to work with the lender and explore options such as adding a co-borrower, adjusting the loan structure, or refinancing to a different lender if required.

Settlement day and final checks

Your solicitor or conveyancer will notify you of the confirmed settlement date once practical completion is certified. The lender will require final ID verification, updated payslips, and confirmation that no material changes have occurred since the last review.

If you are using the First Home Owner Grant or a stamp duty concession, your solicitor will arrange for the grant to be paid at settlement and the concession to be applied through the relevant state revenue office. If you are transferring funds from savings or selling another property to contribute to settlement, those funds must be cleared and available in your solicitor's trust account before settlement can proceed.

For ADF members, confirming your posting status and residency intention before settlement ensures the loan structure remains aligned with the lender's terms. If the property was approved as owner-occupied and you have since been posted, the lender may require the loan to be converted to an investment loan before settlement. This change may affect the interest rate and the ongoing loan terms, so it should be addressed well in advance of the settlement date rather than on the day itself.

Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions