Planning Deposits and Upfront Costs for Off‑the‑Plan Apartments

Buying off-the-plan changes when and how you pay for a property, but the core question stays simple: how much cash do you actually need, and when? In most Australian projects, you’ll pay a 5–10% deposit at exchange, with the balance due at settlement, and you should budget an extra 3–6% of the price for upfront costs like stamp duty, legal fees and loan charges. That deposit can sometimes be partly or wholly covered by a deposit bond instead of cash, but only if you meet strict criteria.

This guide breaks those numbers down with examples so you can decide, this week, whether an off-the-plan apartment fits your cash and borrowing position.

Your contract deposit is only one part of the total funds you’ll need.

1. Quick answer: what deposit and upfront costs you’ll actually need

1.1 Typical deposit requirements for off‑the‑plan

Most Australian off‑the‑plan projects work like this:

• Deposit at exchange: 10% of purchase price is still the most common.
• Variations: some developers offer 5% deposits, or 5% now + 5% later during the build.
• Jumbo or riskier deals: higher deposits (15–20%) are sometimes requested for very expensive units or overseas buyers.

For a $800,000 apartment, a standard contract might require:

• 10% deposit at exchange = $80,000 (cash, deposit bond or bank guarantee)
• 90% (less any rebates) at settlement = $720,000, funded by your loan plus any extra cash you contribute.

1.2 Upfront costs on top of the deposit

Separate to your deposit, you need to budget for:

• Stamp duty (often your biggest cost after the deposit)
• Legal and conveyancing fees
• Loan application and valuation fees
• Lenders Mortgage Insurance (LMI) if you borrow above 80% LVR
• Inspections and reports (pre‑settlement)
• Moving and setup costs (furniture, blinds, internet, etc.)

As a rough planning rule, 3–6% of the price on top of your deposit is usually a realistic starting point, though this varies by state and whether you’re a first‑home buyer or investor.

1.3 Deposit vs lender’s required contribution

Two different “deposit” concepts get mixed up:

1. Contract deposit – what the developer requires at exchange (commonly 10%).
2. Loan deposit / LVR – how much of the property price your lender expects you to contribute at settlement to meet their loan‑to‑value ratio (LVR) rules.

You might only pay 10% to the developer but still need to show a 20% contribution at settlement to avoid LMI with your lender. We’ll tie these two pieces together shortly.

2. How off‑the‑plan deposits actually work

2.1 When do you pay your deposit?

Key milestones:

• Holding deposit / reservation fee – a small amount (often a few thousand dollars) to reserve the unit while contracts are prepared. Usually refundable if you don’t proceed.
• Exchange deposit – the main deposit (5–10%) paid when you sign and exchange contracts.
• No progress payments – for most residential off‑the‑plan apartments, there are no construction progress payments; you just pay the balance at settlement.

Always confirm with your solicitor that your arrangement is a standard residential off‑the‑plan contract, not a ‘build under a building contract’ structure with stage payments.

2.2 Where does your deposit sit?

In a typical arrangement:

• Your exchange deposit is paid into the developer’s solicitor’s trust account or an agent’s trust account.
• Funds are held there until either settlement or until a valid trigger in the contract allows release.
• Interest on deposit funds (if any) is usually dealt with in the contract – sometimes split between parties, sometimes kept by the developer.

This is one reason you should have a property lawyer review the contract before paying anything substantial.

2.3 What if the project is cancelled or doesn’t proceed?

If the developer doesn’t meet conditions precedent (for example, fails to achieve pre‑sales or finance and the project is cancelled under the terms of the contract), typically:

• Your deposit is refunded, usually in full.
• You don’t receive compensation for time or forgone opportunities unless the contract provides for this.

However, if you default (for example, you can’t settle because you can’t get finance), the developer may be able to keep your deposit and pursue you for other losses. That’s why getting your finance strategy and buffers right from day one matters just as much as choosing the building.

For a structured overview of how lenders view off‑the‑plan risk, see Off‑the‑Plan Home Loan Basics and Eligibility in Australia.

3. How much deposit is really “enough”?

3.1 Linking contract deposit, LVR and LMI

Your contract deposit and your lender’s LVR rules need to line up.

• 80% LVR or lower – usually no LMI, but you need to contribute at least 20% of the property’s value plus costs.
• Above 80% LVR – LMI usually applies, increasing your upfront or capitalised costs.

For a $800,000 unit valuing at $800,000 at settlement:

• At 80% LVR, max loan ≈ $640,000.
• You must contribute $160,000 plus costs (less any rebates) – not just the $80,000 contract deposit.

If the property values lower at completion (say at $760,000), your required cash contribution can jump unexpectedly. Managing this risk is covered in detail in “What To Do When Your Off‑the‑Plan Valuation Falls Short” [/insights/off-the-plan-valuation-shortfall-what-to-do-next].

3.2 First‑home buyers and government schemes

If you’re a first‑home buyer, you may not need a full 20% deposit.

Key levers:

• First Home Guarantee (FHBG) – the government guarantees part of your loan, allowing eligible buyers to put down as little as 5% without paying LMI, subject to price caps and strict timeframes.
• State first‑home concessions – reduced stamp duty or grants, depending on the state and property price.
• First Home Super Saver (FHSS) – lets you withdraw certain voluntary super contributions to use as part of your deposit.

These can all be used with off‑the‑plan, but only if the build and occupation timelines fit the rules. The practicalities are covered in Using the First Home Guarantee to Buy Off‑the‑Plan: A Practical Guide.

3.3 Investors, self‑employed buyers and jumbo loans

For investors and self‑employed buyers, lenders may be more conservative:

• Investors borrowing interest‑only or at higher LVRs may face stricter rent and expense assumptions.
• Self‑employed borrowers are often assessed on the lower of the last two years’ tax returns or the average, which can shrink borrowing capacity if income is volatile.
• Larger loans (around or above $2m) are often treated as “jumbo” exposures with lower maximum LVRs, meaning you may need significantly more than a 20% contribution (see [/insights/lvr-lmi-jumbo-loans-over-2-million]).

For these groups, “enough” deposit is less about hitting a single percentage and more about leaving room for valuation changes, interest rate rises and business ups and downs.

4. Funding your off‑the‑plan deposit: options and trade‑offs

Cash, equity and deposit bonds each carry different risks and requirements.

4.1 Cash savings

Cash is straightforward and flexible:

• No lender approval needed to use it as a contract deposit.
• The same cash can later be counted as genuine savings by lenders.
• But once paid into a trust account, you usually can’t access it during the build period.

If you’re committing a large chunk of cash, keep a buffer – tying up every spare dollar for 18–36 months leaves you exposed to personal or business shocks.

4.2 Equity from another property

Many buyers fund their off‑the‑plan deposit by releasing equity from an existing home or investment:

• You refinance or top up your current loan.
• The extra funds are used for the 10% contract deposit and/or future settlement costs.

For example, if your home is worth $1.2m with a $600,000 loan, at 80% LVR you could potentially borrow up to $960,000. That’s $360,000 of gross equity, some of which could be used for your off‑the‑plan deposit and costs. A single snapshot of all your assets and debts, as discussed in [/insights/coordinating-personal-company-smsf-borrowing-premium-property-plan], is invaluable before using the family home this way.

Key considerations:

• Higher total debt means higher repayments now, not just at settlement.
• APRA’s 3% serviceability buffer means lenders test whether you can afford repayments at rates 3 percentage points above today’s, across all debts.

4.3 Deposit bonds and bank guarantees

A deposit bond is an insurance‑style product that promises the developer your 10% deposit at settlement if you default. You pay a fee instead of handing over cash upfront.

High‑level features:

• Typically covers up to 10% of the purchase price.
• Often requires evidence you will qualify for finance at settlement.
• The fee depends on the size of the deposit and length of the bond.

A bank guarantee works similarly but is issued by a bank using your credit capacity or secured assets. Both options:

• Free up cash during the build period.
• Still leave you fully liable for the deposit at settlement.
• May not be accepted by all developers.

They can be powerful tools, but also add complexity and cost. Always have your broker and solicitor confirm whether a deposit bond is sensible for your specific timeline and risk profile.

4.4 Gifts, guarantees and government support

Other common sources of deposit funding:

• Family gifts – must usually be documented as non‑repayable to count as a deposit with many lenders.
• Family guarantees – a parent offers equity in their own home as security instead of you contributing a full cash deposit.
• Government schemes – FHBG, state grants and concessions.

Family assistance structured as a documented loan can make later estate planning fairer between siblings, as discussed in [/insights/joint-ownership-parents-adult-children-loans-title]. However, for lending purposes, a loan from parents may not always count as deposit in the same way as a gift or guarantee; structure matters.

5. Upfront costs beyond the deposit (and what’s deductible)

Upfront costs like stamp duty and legal fees can rival your deposit.

5.1 Stamp duty and off‑the‑plan concessions

Stamp duty often rivals your deposit as a major cash item.

• Each state and territory has its own rates and thresholds.
• First‑home buyers may receive discounts or exemptions.
• Some jurisdictions offer off‑the‑plan concessions or deferrals, for example allowing you to pay stamp duty at completion instead of exchange, or calculating duty on the land value plus completed construction, depending on when you buy.

You must check the current rules with your state revenue office or solicitor, as concessions change regularly.

5.2 Legal, inspections and settlement costs

Budget for:

• Conveyancer / solicitor fees – often $1,500–$3,000 for a thorough review and end‑to‑end work.
• Strata report (if applicable) and pre‑settlement inspections.
• Independent building inspection if the contract allows it.
• Title registration and settlement agent fees.

These are usually not tax‑deductible upfront for owner‑occupiers. For investors, some costs may form part of the cost base for CGT rather than being immediately deductible – your accountant should advise.

5.3 Loan fees, LMI and extras

Common loan‑related costs:

• Application, settlement and valuation fees – vary by lender and product.
• Lenders Mortgage Insurance (LMI) – if borrowing above 80% LVR, often in the thousands or tens of thousands.
• Rate‑locking fees – if you choose to lock a fixed rate prior to settlement.

Many of these can be capitalised onto the loan (added to the amount you borrow) if your LVR still fits policy, but that increases your debt and interest costs.

5.4 Worked example: $800,000 off‑the‑plan unit (NSW, owner‑occupier)

Assume:

• Purchase price: $800,000
• Contract deposit at exchange: 10% = $80,000
• Buyer is not a first‑home buyer and wants 80% LVR at settlement.

Indicative upfront cost map (excluding furniture):

Total non‑loan upfront cash (excluding LMI): roughly $117,500–$124,000.

On top of that, to stay at 80% LVR at settlement, you need to contribute $160,000 in total equity/cash. The $80,000 deposit counts toward that, but you still need another $80,000 in savings, equity, or other contributions plus the cost items shown above.

6. Cashflow and risk during the build period

The build period (often 18–36 months) is where many off‑the‑plan deals come unstuck. The risk is not so much the deposit itself, but what happens to your income, expenses, interest rates and property value before settlement.

6.1 Serviceability and lifestyle creep

Lenders assess your borrowing capacity using benchmarks like the Household Expenditure Measure (HEM) and a 3% interest rate buffer. Meanwhile, real life moves:

• You might take on a new car loan or personal loan.
• Your living costs may rise with children, school fees or business investment.
• Interest rates may increase.

If your housing costs would exceed roughly 30–40% of your net income, especially with a single large property exposure, your risk of financial stress rises significantly (see [/insights/off-the-plan-valuation-shortfall-what-to-do-next]). Planning your deposit without modelling cashflow is asking for trouble.

6.2 Valuation changes and top‑up risks

At settlement, the lender orders a valuation:

• If the valuation equals the contract price, your planned LVR and deposit strategy may hold.
• If the valuation is lower, your effective LVR jumps, and you may be asked to contribute more cash or pay LMI you didn’t budget for.

Example: same $800,000 contract, but the valuation comes back at $760,000.

• At 80% LVR, the lender will only lend $608,000.
• You must now contribute $192,000 (price minus loan) instead of $160,000.
• That’s an unexpected extra $32,000 on top of other costs.

If you’re already thin on buffers, this can be the difference between settling and losing your deposit. If you’re worried about this risk, read [/insights/off-the-plan-valuation-shortfall-what-to-do-next] before you sign anything.

6.3 Self‑employed and business owners

For self‑employed buyers, the build period can span:

• A boom year with great profits, followed by
• A slower year that drags down your “average” assessable income.

Lenders often look at the last two years of lodged tax returns and may use the lower year or an average to assess income. Aggressive tax minimisation that shrinks taxable income in the two years before settlement can materially reduce your borrowing power – sometimes more than the tax saved.

If you’re early in your business journey, the five‑year path mapped out in [/insights/start-up-to-homeowner-five-year-roadmap] is a useful reality check before you lock into a long off‑the‑plan contract.

7. One‑week action plan: get your off‑the‑plan numbers clear

If you’re seriously considering an off‑the‑plan apartment, use the next seven days to get decision‑grade clarity.

Day 1–2: Define your price range and timing

• Confirm your desired price range and realistic completion date (allow for delays).
• Decide whether this is home, investment or both (e.g. live‑in for a few years, then rent out).

Day 3: Map your cash and equity

• List all savings, offset balances and likely future savings by settlement.
• Identify available equity in existing property at a conservative 80% LVR.
• Decide how much of this you’re truly comfortable putting at risk.

Day 4: Estimate deposit and upfront costs

• Use the 3–6% of price rule for upfront costs as a starting estimate.
• Layer on your lender deposit target (e.g. 20% vs 10% + LMI).
• Build a simple table for 2–3 price points (e.g. $650k, $800k, $1m) and see how quickly the numbers scale.

Day 5: Stress‑test your cashflow

• Model repayments at 3 percentage points above today’s rates, not just at current levels.
• Assume your housing costs don’t exceed 30–40% of net income once the property settles.
• Factor in other goals (school fees, business investment, retirement savings).

Day 6: Reality‑check with a broker and solicitor

• Speak with a broker who understands off‑the‑plan about your borrowing capacity today and what could change before settlement (income, credit file, policy).
• Get a solicitor to review a sample or actual contract, focusing on deposit treatment, sunset clauses and default consequences.

For a detailed eligibility checklist you can work through with your broker, use [/insights/off-the-plan-home-loan-eligibility-checklist].

Day 7: Decide your guardrails

Finally, set your personal rules before emotion kicks in:

• Maximum price and total borrowings.
• Minimum cash buffer you’ll keep aside through the build.
• Clear deal‑breakers (e.g. valuation shortfall >10%, build delayed beyond a certain date).

Write these down. This becomes your off‑the‑plan playbook, so you can move quickly when you see a good project without drifting past your risk limits.

Key takeaways

• Most off‑the‑plan buyers need 5–10% at exchange plus around 3–6% of the price for stamp duty and other upfront costs.
• The contract deposit and the lender’s deposit/LVR at settlement are different, and they both have to work.
• Funding options include cash, equity, deposit bonds, family assistance and government schemes, each with distinct risks and paperwork.
• The real risk window is the build period, when income, interest rates and property values can change before settlement.
• A one‑week plan to map cash, equity, costs and cashflow can turn a speculative idea into a yes/no decision with numbers behind it.

If you’d like a calm second set of eyes over your numbers, timelines and risk, speak with a broker and accountant who both understand off‑the‑plan and your broader life goals. A two‑page summary of your position and guardrails now can save you from rushed, stressful decisions on the eve of settlement.

General advice only.