Off-the-plan purchases in Erina attract buyers wanting new construction near Erina Fair and the M1 corridor without committing to a full custom build.
The challenge sits in the gap between contract and settlement. You lock in a price now for a property that settles in 12 to 24 months, and during that period your income might change, lender policies shift, or the completed unit values differently than the developer's marketing suggested. Your home loan pre-approval needs to account for all of that, not just your current position.
Why Lenders Value Off-the-Plan Properties Differently
Lenders assess off-the-plan purchases against the contract price and a separate valuation of the completed property at settlement. If the valuer determines the finished unit is worth less than what you agreed to pay, the lender bases your loan amount on the lower figure. You either need to cover the gap in cash or renegotiate if the contract allows it.
Consider a buyer who signs a contract for a two-bedroom unit in one of the newer developments off The Entrance Road. The contract price sits at the upper end of the current market. When the building completes 18 months later, the valuer assesses it against recent sales of comparable new units in the area. If those sales came in lower due to increased supply or a shift in buyer preferences toward established homes closer to the waterfront, the valuation falls short. The buyer planned for a 10% deposit based on the contract price but now faces a higher loan to value ratio on the lower valuation, which may trigger Lenders Mortgage Insurance or require additional deposit funds they had not set aside.
How Lender Policy Changes Affect Settlement
Lenders review their policies regularly, and an off-the-plan purchase signed under one set of lending criteria may settle under another. Changes to serviceability buffers, debt-to-income limits, or treatment of certain income types can reduce what you qualify to borrow, even if your financial position has not changed.
We regularly see buyers who obtained pre-approval early in the sales phase and assumed that approval would carry through to settlement. One scenario involved a buyer purchasing in a development near Erina Heights Public School. At the time of contract, their lender assessed rental income from an investment property at 80% of the actual rent. By settlement, that same lender had shifted to a 70% assessment due to tightened policy. The reduction in usable income meant the buyer no longer met serviceability requirements for the loan amount they needed. They had to source a different lender willing to assess the income more favourably or reduce the loan size, which was not possible given the fixed contract price.
Ready to get started?
Book a chat with a Finance & Mortgage Broker at CoastFin today.
Income and Employment Shifts Between Contract and Settlement
Your income at settlement needs to support the loan you are drawing down, not the loan you were pre-approved for months earlier. A change in employment, a shift from salary to contracting work, or parental leave can all affect how lenders assess your borrowing capacity.
Buyers moving from permanent employment to contract roles often find that lenders require a longer income history before they will assess the new income at full value. If you sign an off-the-plan contract while permanently employed and transition to contracting six months before settlement, some lenders will average your contract income over 12 or 24 months, which may show a lower figure than your current earnings. Others may exclude it entirely if the contracting period is too short. The result is a smaller loan amount available at settlement than you were counting on.
Sunset Clauses and Revaluation Risk
Most off-the-plan contracts include a sunset clause that allows either party to walk away if the development does not reach practical completion by a certain date. Developers sometimes trigger these clauses deliberately if property values have risen, allowing them to resell units at higher prices. For buyers, this creates both a financial and a lending risk.
If the developer cancels your contract under a sunset clause, you receive your deposit back but lose the benefit of any price growth that occurred while you were locked into the original contract. If you then decide to purchase a different off-the-plan or established property, you are applying for finance under current lending conditions, which may be tighter than when you first received pre-approval. Your home loan application starts from scratch, and there is no guarantee the loan amount or interest rate will match what you were previously offered.
Using a Split Rate Loan for Off-the-Plan Purchases
Some buyers structure their off-the-plan finance with a portion on a fixed interest rate and the remainder on a variable rate to manage interest rate risk during the settlement delay. If rates rise between contract and settlement, the fixed portion provides some insulation. If rates fall or you want to make extra repayments, the variable portion offers that flexibility without triggering break costs.
A split loan also allows you to link an offset account to the variable portion. During the period between exchange and settlement, if you are saving additional funds or have sold another property, parking those funds in an offset account reduces the interest accruing on the variable portion of your loan once it settles. Not all lenders allow offset accounts on off-the-plan loans or newly constructed properties until after settlement, so confirming this feature at the application stage matters if you plan to use it.
When to Reconfirm Your Pre-Approval Before Settlement
Pre-approvals generally last three to six months, but off-the-plan settlements often occur well beyond that window. Reconfirming your finance three to four months before the expected settlement date gives you time to address any serviceability issues, update documentation, or switch lenders if your current lender's policies have shifted unfavourably.
Reconfirming early also allows your broker to identify whether the lender will revalue the property at settlement and whether that revaluation could affect your loan amount. Some lenders automatically order a new valuation closer to settlement for off-the-plan purchases. Others rely on the original valuation or desktop review. Knowing which applies to your loan helps you prepare for potential deposit top-ups or alternative lender arrangements.
If you are purchasing off-the-plan in Erina and want to confirm your loan structure will hold through to settlement, call one of our team or book an appointment at a time that works for you.
