Smart ways to approach off-the-plan buying in Mt Eliza

Buying off-the-plan as a first home buyer means you commit to a property before it exists.

Your deposit is paid at contract, but settlement happens months or years later when construction finishes. During that time, market conditions shift, your financial situation changes, and the property you signed for finally takes shape. For buyers in Mt Eliza looking at off-the-plan apartments or townhouses near the village or around Canadian Bay Road, understanding how finance works across that extended timeline matters more than the purchase price alone.

The single most useful insight is this: your loan approval needs to remain valid through to settlement, not just at contract. If your income, employment, or deposit source changes before the property completes, your lender reassesses everything. Planning for that reassessment from the outset gives you options if something shifts.

How deposits work when you sign before construction starts

When you exchange contracts on an off-the-plan property, you typically pay a deposit of 10% to the developer's trust account. Settlement does not occur until the property reaches practical completion, which can be 12 to 24 months away depending on the project. During construction, you generally do not need to make loan repayments because the loan has not yet settled.

Consider a buyer who signs a contract for a two-bedroom apartment in Mt Eliza with an 18-month build timeframe. They pay a 10% deposit from savings at contract and receive conditional loan approval. Six months before settlement, the lender requests updated payslips, bank statements, and confirmation that their employment remains unchanged. One of the applicants has moved to part-time hours. The lender recalculates borrowing capacity based on the reduced income and determines the loan amount previously approved is no longer available. The buyer either needs to find a larger deposit, apply with a different lender, or negotiate an extension with the developer to allow time to increase their income again.

Off-the-plan contracts often include sunset clauses, which set a date by which the property must be completed or either party can walk away. If a sunset clause expires and the developer has not reached practical completion, you may receive your deposit back without penalty. But if the developer completes on time and your finance falls through due to changed circumstances, you may lose your deposit or face legal action for failure to settle.

What stamp duty concessions apply to off-the-plan purchases in Victoria

Victoria offers a specific off-the-plan duty concession available to all buyers, not just first home buyers, for contracts signed on or before 31 October 2026. Duty is calculated on the land value at the contract date only, not the completed property value. If you sign for an off-the-plan apartment valued at completion around the suburb's current median and the land component is assessed at a lower figure, duty is charged on that lower land value.

First home buyers in Victoria purchasing off-the-plan can layer the general off-the-plan concession with the first home buyer duty exemption or concession. If the completed property value is up to $600,000, you pay no stamp duty. If the value sits between $600,001 and $750,000, a sliding scale concession applies. The off-the-plan concession calculates duty on land value, and the first home buyer concession may reduce or eliminate that duty depending on total property value.

To access the first home buyer concession, you must move into the property within 12 months of settlement and live there as your principal place of residence for at least 12 continuous months. If your circumstances change and you cannot occupy the property as required, you may be liable to repay the concession amount.

Timing your loan application and pre-approval around a long settlement

Most lenders issue conditional loan approval valid for 90 days, though some extend this to six months depending on the product and your circumstances. If your off-the-plan property settles 18 months after contract, your initial pre-approval will expire well before settlement. Lenders reassess your application closer to the expected completion date, and that reassessment is a full credit review, not a formality.

Your home loan application will be reassessed based on your income, employment, credit history, and any changes to lending policy or interest rate buffers at the time of settlement. If you have taken on additional debt such as a car loan or personal loan during construction, your borrowing capacity may reduce. If you have changed employers or reduced your hours, the lender recalculates serviceability.

Applying for pre-approval close to the time you intend to exchange contracts allows you to confirm borrowing capacity before committing. Some buyers approach a broker six months before signing to establish what deposit size and income level they need to maintain through to settlement. Others apply for formal approval only once the developer confirms an expected completion date, then manage their finances carefully during the construction period to avoid any changes that might affect serviceability.

Using the Australian Government 5% Deposit Scheme for off-the-plan properties

The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase with a 5% deposit without paying lenders mortgage insurance. The scheme applies to off-the-plan properties, provided the purchase price and lender-assessed value both sit at or below the applicable price cap for the area. In Victoria, the cap for regional centres including the Mornington Peninsula is $950,000.

Applications are made through a participating lender, not directly through Housing Australia. Not all lenders offer the same loan features under the scheme, so confirming whether offset account or redraw facilities are available matters if those features form part of your repayment strategy. Fixed rate, variable rate, and split loan structures may be available depending on the lender you choose.

Because the scheme involves a government guarantee rather than lenders mortgage insurance, the lender still assesses your application against their usual serviceability criteria. A 5% deposit does not mean automatic approval. Your income, employment stability, existing debts, and credit history all factor into the lender's decision. If the property value at completion exceeds the price cap due to market movement or variations during construction, you may no longer be eligible for the scheme and would need to arrange lenders mortgage insurance or increase your deposit to 20%.

Managing cost variations and valuation differences at settlement

Off-the-plan contracts sometimes include clauses allowing the developer to pass on cost increases for materials, labour, or council requirements. If the final purchase price increases due to a variation clause, your loan amount may need to increase as well. Lenders reassess borrowing capacity based on the higher amount, and if your income has not increased proportionally, you may need to contribute additional cash at settlement.

Valuations can also differ from the contract price. The lender orders a valuation closer to settlement to confirm the property's market value. If the valuer assesses the completed property below the contract price, the lender advances funds based on the lower valuation, not the amount you agreed to pay. You would need to make up the difference in cash at settlement.

In our experience, buyers who maintain a buffer in savings beyond their minimum deposit requirement have more room to absorb variations or valuation shortfalls without needing to renegotiate or delay settlement. Setting aside an additional few thousand dollars during the construction period, rather than spending up to the limit of your savings, provides that buffer.

Choosing between fixed and variable rates when settlement is months away

Locking in a fixed rate at contract when settlement is 18 months away is not typically possible. Lenders allow you to lock a fixed rate only within a specific window before settlement, often 90 days or less. If you want rate certainty and settlement is still distant, you apply for pre-approval on a variable rate, then request to fix the rate closer to the completion date.

Rate movements during construction can work in your favour or against you. If rates drop between contract and settlement, a variable rate or the ability to lock in a lower fixed rate at settlement benefits you. If rates rise, you face higher repayments than you initially planned for. Running scenarios based on a range of rate movements during your planning stage helps you understand what repayments might look like under different conditions.

Some buyers choose a split loan structure at settlement, fixing part of the loan for rate certainty and leaving part variable for flexibility. Others prefer to start on a variable rate with an offset account, then reassess after 12 months once they understand their repayment capacity and spending patterns. Your choice depends on your income stability, risk tolerance, and whether you plan to make extra repayments during the first few years.

What happens if you cannot settle on time

If your finance falls through or your circumstances change and you cannot settle when the developer reaches practical completion, the developer can issue a notice to complete. You typically have 14 days to settle after receiving the notice. If you fail to settle within that period, the developer may terminate the contract, retain your deposit, and pursue you for any losses they incur from reselling the property at a lower price.

Some contracts include hardship clauses or extension provisions, but these are not standard. If you know in advance that your finance or circumstances have changed, speaking to the developer early and exploring whether an extension is possible gives you more options than waiting until the notice to complete is issued. Developers are not obligated to grant extensions, particularly in a rising market where they can resell at a higher price.

Working with a broker during the construction period means you have someone monitoring your loan status and flagging any issues before settlement approaches. If your lender's policy changes or your circumstances shift, a broker can approach alternative lenders and structure a solution before the settlement deadline passes. Waiting until the final weeks to discover your loan is no longer approved leaves little room to find another lender willing to assess and settle in time.

Combining the First Home Owner Grant with off-the-plan purchases

Victoria's First Home Owner Grant provides $10,000 for new homes valued up to $750,000. Off-the-plan apartments and townhouses qualify as new homes, so you can apply for the grant provided the completed property value falls within the cap. The grant is paid at settlement, not at contract, and can be used to reduce the cash you need to bring to settlement or directed into your loan offset account if your lender allows it.

You apply for the grant through your lender or conveyancer as part of the settlement process. Eligibility requires that you or at least one applicant is a natural person, an Australian citizen or permanent resident, and at least 18 years old. You must not have previously received a first home owner grant in any Australian state or territory, and you must move into the property within 12 months of settlement and live there for at least 12 continuous months.

If the property value exceeds $750,000, the grant is not available, but you may still access stamp duty concessions depending on the final value. Buyers sometimes assume the grant applies to any off-the-plan purchase, but the value cap is strict. If variations during construction push the final price above $750,000, you lose eligibility even if the contract price was below the threshold.

Call one of our team or book an appointment at a time that works for you. We can walk through your deposit options, confirm which concessions apply to your situation, and make sure your loan structure stays valid through to settlement.

Frequently Asked Questions