Simple hacks to finance off-the-plan investment property

Lender approval doesn't wait until settlement

Off-the-plan settlements can take 12 to 24 months from contract exchange, and lender appetite for investment loans can shift substantially during that window. Your pre-approval will expire well before the developer hands over the keys, which means you need to secure formal approval close to settlement, not at contract signing.

Consider a buyer who exchanged contracts on a two-bedroom apartment in Wentworthville in early 2025 with a settlement date in late 2026. The loan they were pre-approved for at contract signing was assessed under different serviceability rules and a different DTI lending environment. APRA activated a DTI lending limit on 27 November 2025, effective from 1 February 2026, applying to all ADIs. Each ADI may lend, measured on a quarterly basis, up to 20 per cent of new investor loans to borrowers with a total DTI ratio of six times or greater. That buyer, if their total debt-to-income sat above six times, would now need a lender with remaining capacity under the quota or would need to adjust their loan structure to bring the ratio down.

The practical approach is to obtain an initial pre-approval at contract exchange to confirm borrowing capacity, then refresh that approval four to six weeks before the anticipated settlement date. Between those two points, your income, employment, and the credit policy landscape may all change. Plan for a second full application, not just a rollover.

Deposit structure affects both stamp duty and borrowing capacity

Off-the-plan contracts in New South Wales typically require a 10 per cent deposit, paid in stages. The first instalment is usually due at exchange, with the balance due within 30 to 90 days. That deposit is held in a trust account until settlement, which means it's not available as offset savings and doesn't reduce your loan amount until completion.

If you're planning to use equity from an existing property to fund the deposit, the timing of that release matters. Lenders calculate your borrowing capacity based on all existing debt, including any loan taken to fund the deposit. A separate equity release loan taken at contract exchange will sit on your serviceability for the full construction period, even though the investment loan itself won't settle for another 12 to 24 months. That double-counting can reduce the amount you're approved for at settlement unless you structure the deposit funding as a progress draw rather than a standalone facility.

Another option is to use genuine savings or offset funds for the initial deposit and apply for a single loan at settlement that consolidates both the purchase price and any deposit funding shortfall. That keeps your serviceability cleaner during the construction period, but it requires enough liquid savings to cover the deposit without accessing equity early.

How negative gearing rules apply to off-the-plan purchases

Under the Income Tax Assessment Act 1997 (Cth), losses from residential investment properties held at 7:30pm AEST on 12 May 2026, including properties under contract awaiting settlement at that time, continue to be fully deductible against other income, including salary and wages, until the property is sold. Losses from new builds acquired after 12 May 2026 can also continue to be deducted against all income.

If you exchanged contracts on an off-the-plan property before 12 May 2026, you retain full negative gearing treatment regardless of when the property settles. If you exchange after that date, the property is still treated as a new build, which means losses remain deductible against all income under the exemption for eligible new builds.

Eligible new builds include dwellings constructed on previously vacant land and dwellings replacing existing properties where the number of dwellings increases. A new build occupied for more than 12 months before sale to a subsequent investor loses access to negative gearing for that subsequent purchaser. Most off-the-plan apartments in Wentworthville are part of multi-dwelling developments replacing older housing stock, which qualifies them as new builds under the current definition.

The capital gains treatment also differs. For investors in eligible new build residential properties, both the existing 50 per cent CGT discount and the new indexation and 30 per cent minimum tax arrangements are available as a choice at the time of disposal. That optionality gives you flexibility at sale, depending on your income and holding period.

Interest-only terms and LVR risk at settlement

Most lenders cap interest-only periods on investment loans at five years. For off-the-plan purchases, that five-year clock starts at settlement, not at contract exchange. If you're planning to hold the property long-term and want to minimise cash flow pressure in the early years, an interest-only structure can keep repayments lower while the property appreciates and rental income stabilises.

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. That classification increases the risk weighting on the loan, which can affect pricing and approval appetite. If you're borrowing above 80 per cent LVR, keep the interest-only term at five years or less to avoid the non-standard classification.

The other LVR consideration is valuation at settlement. Off-the-plan properties are valued by lenders based on the completed property, not the contract price. If the market softens during construction, the valuation may come in below the purchase price, which increases your effective LVR and may trigger an LMI requirement you didn't anticipate at contract signing. Some lenders allow you to lock in a valuation early based on the contract price, but that option isn't universal and usually requires the valuation to be completed within 90 days of settlement.

Rental income and serviceability before the first tenant moves in

Lenders assess rental income for serviceability purposes, but the amount they'll accept depends on whether the property has a lease in place at settlement. If the property is vacant, most lenders will apply a discounted rental estimate, typically 75 to 80 per cent of market rent, to account for vacancy risk and leasing costs.

For an off-the-plan property in Wentworthville, rental appraisals are based on comparable properties in the local market, not on the specific unit you're purchasing. If your apartment is in a large new development with limited comparable stock, some lenders may apply a more conservative estimate until the building reaches a certain level of occupancy. That conservatism can reduce the rental income they use for serviceability, which in turn reduces the loan amount you're approved for.

You can improve the serviceability outcome by securing a tenant before settlement. Some investors arrange a lease with a tenant conditional on settlement, which allows the lender to use 100 per cent of the contracted rent rather than a discounted estimate. That approach works if the developer provides access to the property close to the settlement date and you're confident the settlement will proceed on time.

Why sunset clauses and contract terms matter for loan approval

Off-the-plan contracts include a sunset clause, which is the date by which the developer must complete construction or allow either party to rescind the contract. In New South Wales, sunset clauses for residential off-the-plan contracts are regulated under the Conveyancing Act, and developers generally cannot unilaterally extend the clause without consent.

If the sunset date is approaching and construction is delayed, the developer may seek to extend the contract or negotiate a new settlement date. That extension can affect your loan approval in two ways. First, if your pre-approval has expired, you'll need to reapply under current credit policy, which may be tighter or more lenient depending on market conditions. Second, if your financial circumstances have changed during the delay, such as a job change, income reduction, or new debt, your borrowing capacity may no longer support the original loan amount.

We regularly see investors who exchanged contracts with a 12-month settlement window, only to have that window extend to 18 or 24 months due to construction delays. In that scenario, maintaining regular contact with your broker and keeping your financial position stable becomes a priority. Avoid taking on new debt, changing employment, or reducing your income during the contract period if you can, as any of those changes will be reassessed at settlement.

Strata levies and body corporate estimates in Wentworthville

Wentworthville has seen an increase in medium-density apartment developments over the past few years, particularly around the railway station precinct and along Dunmore Street. These developments typically include shared facilities such as lifts, gyms, and common areas, which are funded through quarterly strata levies.

Lenders include estimated strata levies in their serviceability calculations, even if the body corporate hasn't been formally established at the time of your loan application. The developer is required to provide an estimate of ongoing levies in the disclosure statement, and that estimate is used by the lender to assess your ability to service the loan. If the estimate is higher than comparable properties in the area, it can reduce the loan amount you're approved for.

Strata levies in Wentworthville for a two-bedroom apartment in a modern development typically sit between $800 and $1,400 per quarter, depending on the building's facilities and the number of units. Buildings with more extensive common areas or higher insurance costs will sit at the upper end of that range. If the developer's estimate exceeds $1,500 per quarter, ask for a breakdown and compare it to similar buildings in the area. An inflated estimate at the time of contract signing can create a serviceability issue at settlement, even if the final levies come in lower once the body corporate is established.

Foreign investment restrictions and off-the-plan purchases

Under the Foreign Acquisitions and Takeovers Act 1975 (Cth), foreign persons, including temporary residents and foreign-owned companies, are generally banned from purchasing established dwellings in Australia from 1 April 2025 to 30 June 2029. Temporary residents can still apply for FIRB approval to purchase new dwellings or vacant land.

Off-the-plan properties are classified as new dwellings for the purpose of foreign investment rules, which means temporary residents and foreign investors can still purchase them with FIRB approval. The approval process requires an application fee, which varies based on the purchase price, and the approval must be in place before the contract is exchanged.

Foreign investors who acquire vacant residential land are generally subject to a condition that construction be completed within 4 years and that the land not be sold until construction is complete. That condition doesn't apply to off-the-plan apartment purchases, as the construction is being completed by the developer, not the purchaser.

If you're a temporary resident purchasing an off-the-plan investment property in Wentworthville, confirm that your FIRB approval covers the specific property and that the approval remains valid through to settlement. Some approvals are issued with expiry dates that may not align with extended settlement timelines, and renewing an expired approval can delay settlement or require a new application fee.

Call one of our team or book an appointment at a time that works for you. We work with investors across Wentworthville and can help structure your investment loan to fit both the property and your long-term strategy.

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