Beginner's guide to off-the-plan investment loans

Off-the-plan investment loans work differently to standard property finance.

You commit to a purchase price now, you settle in 12 to 24 months, and the property you're borrowing against doesn't exist yet. That creates specific risks around valuation, timing, and borrowing capacity that change between contract and settlement. If you're acquiring an off-the-plan property after 12 May 2026, losses from that property can only be offset against other residential property income from the 2027-28 income year, not against your ambulance salary. That changes the return calculation for most paramedic investors.

This article covers how off-the-plan investment loans are structured, what lenders assess at contract versus settlement, and how the current tax rules affect your decision to proceed.

How off-the-plan loan approvals work across two stages

Lenders assess your borrowing capacity twice: once at pre-approval or contract signing, and again at settlement. The first assessment locks in your loan amount based on the purchase price and your income at the time. The second assessment, which happens when the property completes, determines whether you can still service the debt.

Consider an extended care paramedic earning a base of around $95,000 plus penalties and overtime. You sign a contract to purchase a two-bedroom apartment for $520,000 in a new development completing in 18 months. The lender pre-approves your loan at 90 per cent LVR, subject to a satisfactory valuation at completion. You've paid a 10 per cent deposit from savings, so you need $468,000 at settlement. Eighteen months later, the development completes. The lender orders a valuation. The valuer assesses the completed apartment at $495,000. Your loan amount was based on $520,000, but the security is now worth $495,000. At 90 per cent of the actual value, the lender will only advance $445,500. You need to find an additional $22,500 in cash to settle, or you risk losing your deposit and facing a vendor claim for losses.

That valuation risk is the single largest exposure in an off-the-plan purchase. It doesn't matter what you paid or what the developer promised. The lender advances against the valuer's assessed figure at settlement.

What happens to your borrowing capacity between contract and settlement

APRA requires lenders to assess all new loans at an interest rate at least 3.0 percentage points above the product rate, and from 1 February 2026, lenders can advance no more than 20 per cent of new investor loans to borrowers with a debt-to-income ratio of six times or greater. Both rules apply at settlement, not at contract signing.

If your income drops, your expenses increase, or you take on additional debt between signing and settling, you may no longer meet serviceability. In our experience, this happens most often when paramedics take on a car loan, increase their credit card limit, or reduce shift work in the months before settlement. The lender re-runs the numbers. If you no longer meet the buffer or the DTI threshold, the loan is declined. You either find another lender willing to approve you under their risk settings, bring in a guarantor, or walk away from the contract.

Why the negative gearing changes matter for off-the-plan buyers

Properties under contract at 7:30pm AEST on 12 May 2026 and properties classified as eligible new builds continue to allow full deductibility of losses against all income, including wages. An eligible new build includes a dwelling constructed on previously vacant land or a development that increases the total number of dwellings on the site. Most off-the-plan apartment developments and townhouse projects qualify.

For established properties acquired after 12 May 2026, losses are only deductible against other residential property income from the 2027-28 income year. That means if you buy an existing unit as your second investment, any shortfall between rent and holding costs can't reduce the tax on your paramedic income. You carry the loss forward and offset it against future rental income or capital gains when you sell.

If you're buying off-the-plan and the project qualifies as a new build, you retain full negative gearing. That makes the after-tax cost of holding the property lower during the years you're paying down debt or managing a high loan-to-value position. It's one reason off-the-plan purchases are being prioritised by salaried investors who previously relied on negative gearing to manage cash flow.

Deposit structures and the 10 per cent problem

Most developers require a 10 per cent deposit on exchange of contracts. That deposit is held in trust until settlement. It's not counted as equity by your lender. If you're funding the deposit from savings, those funds are locked away for the entire construction period. If you're releasing equity from an existing property to fund the deposit, you're paying interest on that released equity for 12 to 24 months before the investment property generates any rental income.

Some lenders allow you to borrow the deposit using a separate loan secured against another property. This is common where a paramedic already owns their home and has sufficient equity to support both the deposit loan and the main investment loan at settlement. The deposit loan sits dormant during construction. At settlement, both loans are drawn and the investment property is registered as security. You're servicing the deposit loan during construction, but you're not yet holding the asset that will produce the income to support it.

That structure works when your equity position is strong and your income can service both loans without rental assistance. It doesn't work if you're already at or near your borrowing limit, because the lender applies the serviceability buffer to both loans from day one.

Interest-only loans and cash flow during the holding period

Interest-only loans allow you to pay only the interest portion of the loan for a set period, typically up to five years, which reduces your monthly repayment and improves cash flow while you're building equity or holding the property for capital growth. Most paramedic investors use interest-only terms on investment loans to maximise the tax-deductible portion of their repayments and preserve cash for other investments or offset accounts on their home loan.

For off-the-plan purchases settling in a new development, rental income may take several months to stabilise. The building might not have an occupancy certificate immediately at settlement. Body corporate arrangements might still be forming. Rental appraisals are often based on comparable properties in the suburb, not on actual leases in your building. If your building is the first stage of a larger precinct, there may not be comparable stock yet.

Interest-only loans give you breathing room during that period. You're not forced to cover principal repayments while the property is vacant or underperforming. Once the tenancy is secured and the area matures, you can switch to principal and interest if your strategy shifts toward debt reduction.

LMI on investment loans and the 90 per cent ceiling

Lenders Mortgage Insurance covers the lender's exposure when the LVR exceeds 80 per cent, and the premium is calculated on a sliding scale based on loan amount and LVR. For investment loans, most lenders cap LVR at 90 per cent even with LMI. Some lenders cap it lower, at 85 per cent, depending on the location or the borrower's existing debt.

Paramedics can access LMI waivers on owner-occupied loans through specific lender programs, but those waivers rarely extend to investment lending. On a $520,000 purchase at 90 per cent LVR, you're borrowing $468,000. The LMI premium on that loan might be $15,000 to $18,000, depending on the lender and your deposit source. That premium is usually capitalised into the loan, which increases your total debt and your ongoing repayments. If the property is valued lower at settlement and you need to reduce the LVR to 85 per cent or 80 per cent to proceed, the premium recalculates or disappears, but you need to bring more cash to settlement.

Some ambulance officers use equity release from their home to fund the investment deposit and avoid LMI altogether by keeping the investment loan at or below 80 per cent LVR. That approach works if your home has sufficient equity and your income can service both loans under the 3.0 percentage point buffer.

Sunset clauses and developer delays

Every off-the-plan contract includes a sunset clause, which is the date by which the developer must complete the project and settle. If the developer doesn't meet that date, either party can rescind the contract. In a rising market, developers sometimes invoke the sunset clause deliberately to re-sell at a higher price. In a falling market, buyers sometimes use the clause to exit a contract where the property is now worth less than the purchase price.

Sunset clauses in New South Wales, Victoria, and Queensland are regulated. Developers generally need the buyer's consent or a court order to rescind after the sunset date. In other states, the contract terms control. If you're buying off-the-plan in a state without specific statutory protection, your solicitor should negotiate a sunset clause that gives you enough notice and limits the developer's ability to walk away without penalty.

From a lending perspective, a delayed settlement extends the period during which your borrowing capacity can shift. If settlement is delayed by 12 months, you've now been carrying the deposit loan or holding your savings out of use for twice as long as planned. Your lender's pre-approval may have expired. You'll need to reapply, and the lender will reassess your income, expenses, and debt position from scratch. If the DTI limit or serviceability buffer has tightened in the interim, you may no longer qualify for the same loan amount.

Foreign investment restrictions and their effect on off-the-plan markets

Foreign persons are generally banned from purchasing established dwellings in Australia from 1 April 2025 to 30 June 2029, but temporary residents can still apply for approval to purchase new dwellings or vacant land. Application fees for established dwelling exceptions were tripled from 1 April 2025. Off-the-plan apartments and new builds remain accessible to foreign buyers, which has historically supported demand and pricing in that segment.

The extension of the established dwelling ban to 30 June 2029 keeps offshore demand directed toward new stock. That affects your investment because it supports settlement values in off-the-plan developments where foreign buyers make up a significant portion of pre-sales. It also concentrates demand in specific precincts and apartment formats that meet the size, location, and price expectations of offshore buyers. If you're buying in a development heavily marketed offshore, your rental pool and resale market will be influenced by visa settings, offshore credit access, and FIRB policy shifts over the holding period.

How capital gains tax treatment differs for new builds from 1 July 2027

From 1 July 2027, capital gains on most residential investment properties are taxed using cost base indexation and a 30 per cent minimum tax rate on real gains accruing from that date, but investors in eligible new builds can choose between the indexed treatment and the existing 50 per cent discount at the time of sale. That choice gives new build buyers a structural tax advantage on exit.

If you purchase an off-the-plan apartment settling in late 2026 or 2027, and you hold it for 10 years, you'll calculate your gain by splitting the growth into pre-1 July 2027 and post-1 July 2027 portions. The post-2027 portion can be indexed for inflation, and you pay tax only on the real gain. If your effective tax rate on that portion is below 30 per cent, the minimum rate applies. If you're still working full-time as a paramedic at the time of sale, your marginal rate will likely exceed 30 per cent, so the minimum rate won't bind. But you still benefit from indexation, which reduces the taxable gain relative to the old 50 per cent discount in a high-inflation environment.

For investors who plan to hold the property into retirement or while receiving government payments, the minimum rate does not apply in any financial year they receive payments such as the Age Pension, Disability Support Pension, or JobSeeker. That makes new builds a more flexible hold for paramedics planning to transition out of shift work or reduce hours later in their career.

What to do before signing a contract

Get unconditional pre-approval from a lender who will still be operating in 12 to 24 months. Not all lenders remain active in the investment loan market, and policy settings change. A pre-approval with a lender who tightens their investment lending criteria six months before your settlement date is not a pre-approval you can rely on. Work with a broker who knows which lenders are stable in their investment loan settings and which have a history of pulling back when credit conditions shift.

Run the numbers assuming the property settles at 5 per cent below contract price. If you can't fund that shortfall, you're taking valuation risk you can't carry. Build a buffer in cash or accessible equity before you exchange contracts, not after.

Confirm the development qualifies as an eligible new build under the tax rules if you're relying on negative gearing to make the investment work. Your solicitor or accountant can assess the contract and the planning permits to verify the dwelling count increases or the site was vacant land. Don't assume every off-the-plan contract qualifies. Knock-down rebuilds that replace one dwelling with one dwelling do not qualify, even if the contract is new.

Instruct your solicitor to negotiate a sunset clause that requires developer consent to extend and provides for deposit refund without penalty if the developer delays beyond the clause date. That gives you an exit if the project stalls or market conditions deteriorate during construction.

Call one of our team or book an appointment at a time that works for you. We'll assess your borrowing capacity now and at your expected settlement date, identify lenders who hold pre-approvals through construction, and structure your deposit and loan to manage valuation risk and serviceability shifts. Off-the-plan lending requires forward planning. We make sure your approval holds when the project completes.

Frequently Asked Questions