The Pros and Cons of Off-the-Plan Home Loans

Off-the-Plan Finance Works Differently to Standard Home Loans

Off-the-plan purchases in Camberwell require a different approach to finance. You sign the contract today, but settlement happens months or years later when construction is complete. Lenders assess your borrowing capacity at application and again before settlement, which means your approval from today might not match what you can borrow in two years.

Pre-approval for off-the-plan purchases typically lasts 90 to 120 days, but your settlement might be 18 to 36 months away. Most lenders will require a formal reapplication closer to settlement. Your income, expenses, credit history, and lending policies can all shift during that window. In our experience, buyers who secure conditional approval early and maintain regular contact with their broker are better positioned when settlement approaches.

Consider a buyer who secured approval for an apartment in Camberwell's Canterbury Road precinct in early 2024. They were borrowing at 85% LVR with a household income of $150,000. By settlement in mid-2026, one applicant had changed jobs twice, their credit card limits had increased, and the lender had tightened its serviceability buffer. The reapplication required additional documentation, and the couple had to reduce their credit card limits and delay settlement by six weeks to meet the updated criteria. Their home loan pre-approval was still valid in principle, but the changed circumstances meant the original structure no longer fit.

Sunset Clauses and Their Impact on Your Finance Timeline

A sunset clause sets the date by which the developer must complete the property or allow either party to rescind the contract without penalty. If the developer misses that date and you choose to walk away, you receive your deposit back, but you've lost the opportunity cost of holding that capital.

Camberwell developments near Riversdale Road and Burke Road typically include sunset clauses between 24 and 36 months from contract date. Buyers relying on the Australian Government 5% Deposit Scheme need to factor in the scheme's property price caps and availability at the time of settlement, not at the time of contract. If settlement is delayed beyond the sunset clause and you need to reapply, rates and lending criteria might have shifted.

The sunset clause also affects your planning around state-based concessions. Victoria's off-the-plan duty concession applied to strata or community title contracts signed on or before 31 October 2026. If your settlement extends beyond that window due to construction delays, your contract date still determines eligibility, not your settlement date. The concession calculates duty on the land value at contract date only, which can deliver substantial savings on higher-value properties in suburbs like Camberwell where land values are above the metro median.

Valuation Risk Between Contract and Settlement

Lenders will order a valuation at or near settlement based on the completed property. If the valuation comes in below the contract price, the shortfall affects your loan amount. A property contracted at $900,000 that values at $850,000 leaves a $50,000 gap that you'll need to cover with additional deposit or by renegotiating the contract if possible.

Valuation risk is higher in precincts where there's concentrated supply of similar stock. Camberwell's medium-density developments along Burwood Road and Riversdale Road have seen multiple projects complete within the same quarter in recent years. When several developments in the same area settle at similar times, valuers have access to a higher volume of comparable sales, which can compress valuations if the market softens or if buyer appetite shifts.

Buyers using a construction loan structure for house-and-land packages face a slightly different valuation process, as the lender releases funds progressively based on build stages rather than a single settlement valuation. Off-the-plan apartment buyers don't have that flexibility. Your lender assesses the completed dwelling at one point in time, and if the valuation falls short, you'll need to find the difference before settlement can proceed.

Fixed Rate Lock-Ins Are Not Available for Delayed Settlements

You cannot lock in a fixed rate at contract date for a settlement that's 24 months away. Lenders offer rate locks for a maximum of 90 to 120 days before settlement. If you're signing a contract today for a property settling in late 2028, your interest rate will be whatever the lender offers at the time you formally draw down the loan.

Some buyers assume that applying for home loan pre-approval includes a rate commitment. It does not. Pre-approval confirms borrowing capacity and conditional loan structure, but the interest rate applies only at settlement. Between now and settlement, the Reserve Bank may move the cash rate multiple times, lenders may adjust their pricing, and your serviceability will be re-tested at whatever rates are current.

This also affects your decision between variable rate, fixed rate, or a split loan structure. You can plan your preferred structure now, but you'll need to make the final call closer to settlement based on the rates and loan features available at that time. Buyers who are purchasing as first home buyers and relying on government schemes should also confirm scheme eligibility and price caps at the time of reapplication, as these can change between contract and settlement.

Deposit Structures and Holding Costs Before Settlement

Off-the-plan contracts typically require a 10% deposit, paid in stages. A common structure is 5% on exchange and 5% within 90 days. That deposit sits with the developer's solicitor in a trust account until settlement. You're not paying down the loan during this period, but you're also not earning much on that capital.

If you're stretching to save the deposit and settlement is delayed, you'll need to hold that capital in low-yield accounts for longer than expected. Buyers who are also paying rent during the construction phase carry a double cost. The holding period for off-the-plan purchases in Camberwell can extend beyond two years for larger developments, which means you might be renting for another 24 months while your deposit is locked away.

For buyers considering an investment loan structure, you cannot claim any deductions during the construction phase unless you've taken out the loan and are paying interest. Most lenders will not draw down the loan until settlement, which means there are no interest costs to deduct and no rental income to declare. The property only becomes an income-producing asset once you take possession and either occupy it or lease it out.

When Off-the-Plan Purchases Align With Your Goals

Off-the-plan purchases suit buyers who want a new property in a specific location where established stock is limited or tightly held. Camberwell's established housing stock is predominantly period homes and older units, with limited turnover of renovated or new builds. If you want a new apartment within walking distance of Camberwell Junction or near Camberwell train station, off-the-plan might be your only realistic option.

The Victorian duty concession on off-the-plan strata contracts also makes this structure appealing for buyers at higher price points. Duty calculated on land value at contract date rather than total property value at settlement can save tens of thousands on properties above $800,000. This concession applied to contracts signed on or before 31 October 2026, so buyers contracting after that date will pay standard duty on the full contract price.

Off-the-plan also suits buyers who are not in a rush to move and who have stable income and employment. If you're confident your financial position will hold or improve over the next two years, and you're comfortable with the reapplication process, the structure works well. If your income is variable, you're planning a career change, or you're relying on a partner's income that might shift, the reapplication risk becomes harder to manage. In those cases, purchasing an established property with a standard home loan and a shorter settlement period might be more suitable.

If you're weighing up an off-the-plan purchase in Camberwell or comparing it to established stock in nearby Carnegie, Malvern East, or Malvern, call one of our team or book an appointment at a time that works for you. We'll walk through your borrowing capacity, the timeline for your target development, and the lending structures that match your settlement date and financial position.

Frequently Asked Questions