Working Out Your Real Deposit Need for an Off‑the‑Plan Apartment

Buying off‑the‑plan in Australia usually means paying a 5–10% deposit at exchange, then nothing more until settlement – but that’s only part of the story. How much deposit you really need depends on the final valuation, your target loan‑to‑value ratio (LVR), and whether you’re prepared to pay lenders mortgage insurance (LMI) or risk a last‑minute cash scramble.

In practice, most off‑the‑plan buyers should plan for enough savings or equity to end up with around 15–20% net equity at settlement, plus a separate cash buffer for costs and surprises. The more your valuation or income could move over the build period, the higher that target should be.

This guide turns that into numbers you can work through this week.

Your contract deposit is only the first piece of the off‑the‑plan puzzle.

1. The two deposits you need to think about

When people ask, “How much deposit do I need for an off‑the‑plan apartment?”, they usually mean the money due now. Lenders and risk, however, care about the money available at settlement.

1.1 Exchange deposit vs settlement deposit

You effectively have two “deposit” concepts:

• Exchange deposit (contract deposit)
  Paid to the developer’s trust account when you sign the contract. Commonly:

  • 5% for some projects or promotions
  • 10% as a standard expectation in many markets

• Settlement deposit (equity position)
  What the bank sees as your contribution when the building is finished. This is driven by:

  • Final valuation at completion
  • Your loan size
  • Resulting LVR and whether LMI applies

Your exchange deposit counts towards your equity, but it may not be enough if prices fall or your borrowing power changes.

For a broader overview of other upfront costs beyond the deposit, see Planning Deposits and Upfront Costs for Off‑the‑Plan Apartments.

1.2 Why off‑the‑plan deposits are riskier

With an established property, deposit and settlement are close together. Your valuation, income and lending rules are largely “now issues”.

With off‑the‑plan, there’s a gap of 1–3 years (sometimes more). Over that period:

1. Property values can move up or down.
2. Your income, savings and debts can change.
3. Lending rules, interest rates and tax policy can shift.

Lenders are very aware of this. They use conservative assumptions – including APRA’s typical 3% serviceability buffer over actual rates – and they never guarantee a loan until much closer to settlement (see Off-the-Plan Home Loan Basics and Eligibility in Australia).

2. Typical off‑the‑plan deposit ranges in Australia

Let’s pin down the typical numbers you’ll see in marketing material – then compare them with what’s actually safe.

2.1 What developers usually ask for at exchange

Common contract deposit patterns:

• 10% of the contract price – still the norm in many projects.
• 5% (or 5% now, 5% later) – used to attract first‑home buyers or create urgency.
• Higher deposits (15–20%) – sometimes sought for smaller developers or higher‑risk projects.

The contract deposit is negotiable in some cases, especially if:

• You’re buying multiple apartments.
• You’re an early buyer in the project.
• The market is softer and the developer wants pre‑sales.

However, negotiating the contract deposit down doesn’t change what the bank needs at settlement.

2.2 What banks are comfortable with at settlement

For the home loan, lenders think in terms of LVR bands and LMI:

• ≤80% LVR – usually no LMI; bank funds up to 80% of value.
• >80%–90% LVR – LMI applies; still widely available for many borrowers.
• >90%–95% LVR – niche; often tighter credit rules, higher LMI, and many lenders avoid this for off‑the‑plan entirely.

Indicatively:

• Owner‑occupier P&I loans up to 90% LVR are common if your situation is strong.
• Investors, interest‑only and self‑employed buyers may be capped at 80–90% LVR, sometimes less for specific developments.

Because off‑the‑plan carries extra risk, some lenders quietly restrict high‑LVR lending or apply tougher shading to your income.

3. Turning LVR bands into real cash numbers

Now we convert those percentages into dollars so you can see what you’re really committing to.

3.1 Worked example: $800,000 off‑the‑plan apartment

Assume:

• Contract price now: $800,000
• Expected completion: 2 years
• Buyer: Owner‑occupier, solid income, standard full‑doc loan

Scenario A – aiming for 80% LVR (no LMI)

• Bank lends: 80% x $800,000 = $640,000
• Your equity at settlement: $160,000
• Plus upfront costs (stamp duty, legal, loan fees, inspections): say 4% ≈ $32,000

You need around:

• $192,000 total cash/equity by settlement ($160k equity + $32k costs)

If the developer wants a 10% contract deposit:

• You pay $80,000 at exchange.
• You must find another $112,000 by settlement.

Scenario B – comfortable with 90% LVR (with LMI)

• Bank lends: 90% x $800,000 = $720,000
• Your equity at settlement: $80,000
• Same 4% costs ≈ $32,000

You need around:

• $112,000 total cash/equity by settlement.

If you’ve already paid a 10% contract deposit ($80k), you only need $32,000 more in savings for costs – but you’ll likely pay LMI, which on a 90% LVR $720k loan could easily be $10,000–$20,000+ (paid upfront or capitalised into the loan).

3.2 How much buffer is sensible?

In reality, you rarely get a clean run. Over a 2–3 year build, it’s wise to add a buffer on top of these numbers:

• At least 3–5% of the purchase price as a rainy day fund, separate from your deposit.
  On an $800k apartment, that’s $24,000–$40,000.

That buffer can cover:

• Valuation shortfalls.
• Higher‑than‑expected LMI.
• Setup costs your estimate missed.
• Small changes to your borrowing capacity.

For more on how settlement valuations affect your LVR and LMI, read Off-the-Plan Valuations, LVR and LMI: Getting Settlement-Ready.