The easiest way to buy off-the-plan in Malvern

Buying off-the-plan means planning for a settlement date you can't control

Off-the-plan purchases settle when construction finishes, not when you sign the contract. Construction delays can push settlement out by six months or more, and your pre-approval typically expires after 90 days. If settlement occurs a year after you apply for finance, lenders will reassess your income, expenses and the property's value at completion. Changes to your employment, credit score or lending policy can affect your borrowing capacity when you need it most.

Consider a buyer who secures pre-approval for an off-the-plan apartment in Malvern with an expected settlement in 12 months. Eight months later, the developer advises that practical completion has been delayed to 18 months from contract date. The buyer's original pre-approval has expired. Interest rates have moved, and their casual employment has reduced to three days per week. When formal approval is sought closer to settlement, their borrowing capacity has dropped, and they need a co-borrower to proceed. The property value at completion comes in lower than the contract price, and the lender requires additional equity to settle. The transaction proceeds, but only after restructuring the loan and involving family support that was not originally anticipated.

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

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 at completion both remain within the applicable price cap. In Victoria, the cap for capital city and regional centre properties is $950,000. For other areas in Victoria, the cap is $650,000. Malvern falls within the capital city classification.

Applications are made through participating lenders, and loan features vary by lender. Some lenders within the panel offer offset accounts and redraw facilities on variable rate loans, while others restrict features depending on the loan structure. If you are considering a split loan with both fixed and variable components, confirm feature availability with your broker before committing to a contract. Not all participating lenders support split structures under the scheme.

Victoria's off-the-plan stamp duty concession expired in October

Victoria's off-the-plan stamp duty concession, which calculated duty on land value only for contracts signed on or before 31 October 2026, has now ended. Contracts signed after that date are subject to standard duty rates unless the buyer qualifies for the first home buyer duty exemption or concession. The first home buyer exemption provides full relief on properties valued up to $600,000, with a sliding scale concession on properties between $600,001 and $750,000. Most off-the-plan apartments in Malvern exceed the $750,000 threshold, meaning duty applies at standard rates for buyers who do not meet the full exemption criteria.

For a contract signed in Malvern at $850,000, duty would be approximately $45,070 under standard rates. Buyers should account for this cost when determining their first home buyer budget and ensure sufficient funds are available at settlement, as stamp duty is payable on the contract price, not the value at completion.

Pre-approval does not guarantee settlement approval

Pre-approval is an assessment based on your financial position at the time of application. It is not a binding commitment from the lender. When settlement approaches, the lender reassesses your application using updated financial information, a formal valuation of the completed property, and current lending criteria. If your income has decreased, your expenses have increased, or the lender's serviceability buffers have tightened, your borrowing capacity may be lower than initially approved.

Lenders also revalue the property at practical completion. If the valuation comes in below the contract price, the lender calculates the loan-to-value ratio using the lower figure. A buyer purchasing an apartment for $900,000 with a 10% deposit may find that the property values at $850,000 on completion. The lender now treats the loan as having a higher LVR, which may trigger Lenders Mortgage Insurance, require a larger deposit, or result in a decline if the revised LVR exceeds the lender's maximum threshold.

Planning for changes in employment and income

Off-the-plan purchases often involve lengthy settlement periods, and your employment status may change during that time. Lenders assess ongoing employment stability at the time of formal approval. If you have moved from permanent to casual employment, taken parental leave, reduced your working hours, or changed employers, the lender will reassess your income and may apply different serviceability criteria.

Some lenders accept 12 months of casual or contract income, while others require two years. If you have recently started a new role, even in the same industry, some lenders may decline the application or apply a reduced income assessment until you have completed a qualifying period. Discussing low deposit options with a broker before contract signing allows you to understand how different scenarios affect your ability to settle, particularly if your employment circumstances are likely to change.

Keeping savings intact until settlement

Lenders require genuine savings to be held for at least three months before application. If you use those savings for other purposes after receiving pre-approval, you may not meet the lender's deposit requirements when formal approval is required. This can result in a decline or a requirement to source additional funds at short notice.

Genuine savings include funds held in savings accounts, term deposits, or shares. Gifted deposits from immediate family are generally accepted by most lenders, but the donor must provide a statutory declaration confirming the funds are a gift and not a loan. Some lenders will accept non-genuine savings such as the First Home Super Saver Scheme, but policies vary. If you are planning to rely on funds released under the FHSS, confirm with your broker that your chosen lender accepts this source before signing a contract.

Valuations at completion can fall short of the contract price

Property values fluctuate, and the apartment you contracted to purchase 18 months ago may not be worth the same amount when construction finishes. Lenders use the lower of the contract price or the completed valuation to calculate the loan amount. If the valuation is lower, you may need to increase your deposit to meet the lender's LVR requirements.

In a scenario where a Malvern apartment is purchased off-the-plan for $920,000 with a 10% deposit under the Australian Government scheme, the buyer expects to borrow $874,000. At completion, the property values at $880,000. The lender recalculates the maximum loan at 95% of $880,000, which is $836,000. The buyer now needs to find an additional $38,000 to settle. This shortfall must be paid in cash, as the lender will not finance beyond the revised LVR. Buyers should maintain a buffer in savings beyond the minimum deposit to cover potential valuation shortfalls.

Sunset clauses and contract rescission rights

Off-the-plan contracts include a sunset clause, which allows either party to rescind the contract if settlement has not occurred by a specified date. Developers sometimes seek to extend the sunset date through contract variations. Buyers have the right to refuse the extension, but doing so may result in the contract being rescinded if the developer cannot complete on time.

If the contract is rescinded due to a sunset clause, the buyer's deposit is refunded, but they lose the benefit of any capital growth or duty concessions that applied at the time of contract. If property values have risen, the buyer loses that gain. If values have fallen, rescission can be financially advantageous, though not all buyers are aware of this at the time. Understanding your rights under the contract and seeking legal advice before agreeing to any variation is essential. Your mortgage broker can work with your solicitor to ensure that any extension to the settlement timeline does not compromise your ability to secure finance at completion.

Working with a broker who understands delayed settlement finance

Off-the-plan purchases involve unique risks that do not apply to established property transactions. A broker experienced in managing delayed settlement timelines will structure your initial application to account for potential changes in employment, policy and valuation. They will also maintain contact with you throughout the construction period, reconfirm your financial position several months before expected settlement, and ensure that formal approval is lodged in time to meet your settlement obligations.

AXTON Finance works with first home buyers in Malvern who are purchasing off-the-plan and need finance structured to account for construction delays, valuation risk and policy changes. Call one of our team or book an appointment at a time that works for you.

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