Top tips to fund an off-the-plan investment property

Buying an investment property before it's built gives you time to save and plan, but the finance works differently to buying an established home.

You'll apply for pre-approval now, but the loan won't settle until construction finishes, sometimes 18 to 24 months later. That gap creates specific risks lenders watch closely, especially if you're new to Australia and still building your credit history here. The key is understanding what lenders assess at approval and what they reassess at settlement, so you're not caught out when the property is ready.

How lenders assess off-the-plan purchases differently

Lenders treat off-the-plan investment purchases as higher risk because your financial situation and the property market can both change significantly between contract and settlement.

When you apply, the lender assesses your current income, employment, and deposit. They issue conditional approval based on those details and the property's projected value once built. But when the building is finished and settlement approaches, they reassess everything: your income, employment status, any new debts, and the property's actual market value through a fresh valuation. If your circumstances have changed or the market has softened, the lender can reduce the approved loan amount or withdraw the offer entirely. Consider a buyer who signed a contract in early 2023 with stable employment and a 10% deposit. By settlement in mid-2025, they had changed jobs twice and taken on a car loan. The lender reassessed and required an additional 5% deposit to proceed because the new employment history didn't meet their stability requirements.

Why your deposit and genuine savings matter more

Most lenders require a minimum 10% deposit for an investment loan, but off-the-plan purchases often attract stricter treatment, especially for new migrants.

If you've been in Australia less than two years, some lenders will ask for evidence that your deposit has been held in an Australian bank account for at least three months. Funds transferred from overseas may be accepted, but you'll need to show the source, usually through bank statements translated into English and verified by your broker. Lenders want to see that you can sustain savings over time, not just move money around before applying. The deposit also determines whether you'll pay Lenders Mortgage Insurance (LMI). Borrowing above 80% of the property's value triggers LMI, which can add thousands to your upfront costs. For an off-the-plan property valued at completion around the median for outer Melbourne growth areas, LMI on a 90% loan could cost between $8,000 and $15,000 depending on the lender and loan amount.

Interest only or principal and interest repayments

You can structure an investment loan as interest only or principal and interest, and the choice affects your cash flow and tax position.

Interest only repayments are lower each month because you're not paying down the loan balance. This can help if rental income doesn't cover all your costs and you're relying on negative gearing to reduce your taxable income. The downside is that you're not building equity through repayments, only through any capital growth in the property's value. Principal and interest repayments are higher but reduce the loan balance over time, which can make refinancing or buying a second property easier down the track. If you're new to Australia and your income is still growing as you establish your career here, starting with interest only can give you breathing room, but you'll need to switch to principal and interest eventually, usually after five years when the interest only period ends.

What happens if the property value drops before settlement

If the property's value at completion is lower than the contract price, you're still obliged to settle at the price you agreed to pay, but the lender will only lend based on the lower valuation.

This means you'll need to cover the shortfall with additional savings or equity from another property. In a scenario where you signed a contract for $520,000 but the completed property values at $480,000, the lender will calculate your loan based on $480,000. If you were borrowing 90%, the loan amount drops from $468,000 to $432,000, leaving you to find an extra $36,000 to settle. This risk is higher in areas with large amounts of new supply coming online at the same time, which can push down prices temporarily. Some lenders also apply a further discount to off-the-plan valuations, treating the projected value more conservatively than they would for an established property.

Fixed or variable rates for off-the-plan investment loans

You'll need to choose between a fixed rate, variable rate, or a split when your loan is approved, but the rate you lock in applies from settlement, not from contract.

If you choose a fixed rate at approval and interest rates drop before settlement, you're locked into the higher rate unless you renegotiate or switch lenders. If rates rise, you're protected. Variable rates move with the market, so you'll pay whatever the rate is when the loan starts. A split lets you fix part of the loan and keep part variable, which can give you some certainty on repayments while still allowing extra repayments on the variable portion. For new migrants, a fixed rate can make budgeting simpler while you're still adjusting to Australian living costs and tax obligations, but you'll pay a higher rate for that certainty and lose flexibility to make extra repayments without penalty.

Rental income and how lenders assess it

Lenders will use rental income to calculate your borrowing capacity, but they don't accept the full amount.

Most lenders apply a vacancy rate, usually around 5%, and only count 80% of the expected rent. So if the property is expected to rent for $500 per week, the lender will assess it as $380 per week in your favour. If you're new to Australia and don't have other investment properties or a long employment history here, lenders may be more conservative, especially if your income is still being assessed under temporary visa conditions. Rental income also doesn't help you until the property is tenanted, so you'll need to budget for several weeks of no income after settlement while you find a tenant and cover the mortgage, body corporate fees, and other holding costs yourself.

How recent tax changes affect off-the-plan investors

If you're buying an off-the-plan property that will settle after 1 July 2027, you may benefit from continued access to the 50% capital gains tax discount, which has been removed for established properties purchased after Budget night in May 2026.

The government announced that investors in new builds, including off-the-plan apartments and townhouses, can choose between the old 50% discount or the new inflation-indexed system when they eventually sell. This makes off-the-plan purchases more attractive from a tax perspective than buying an established investment property right now. However, if you're purchasing an off-the-plan property as a new migrant, you'll need to consider your residency status for tax purposes at the time of sale, as non-residents are taxed differently on capital gains and don't receive the same concessions. Speak to a tax adviser before you contract to make sure you understand how the rules apply to your situation, especially if you're on a temporary visa now but plan to apply for permanent residency later.

What documentation lenders need from new migrants

If you've been in Australia less than two years, lenders will ask for additional documents beyond what Australian citizens or permanent residents provide.

You'll need your visa details, proof of how long you've been in the country, and evidence of your employment history here. Some lenders will accept overseas employment history if it's in the same field, but you'll need documents translated and verified. Your deposit source will be scrutinised more closely, especially if funds are coming from overseas or from family members. A signed gift letter and proof that the money has been transferred into your name won't always be enough - some lenders want to see the funds held in your account for three months or more. If you're self-employed or on a temporary visa, expect the process to take longer and the list of required documents to grow as the lender works through their assessment.

Building wealth through property investment in Australia is possible for new migrants, but off-the-plan purchases require careful planning and an understanding of how lenders assess risk over a long settlement period. Call one of our team or book an appointment at a time that works for you to talk through your situation and work out which investment loan options suit your goals and timeline.

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