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When buying off-the-plan, paying your deposit in cash is often seen as the standard option. Whether it comes from savings, equity, or the sale of an existing property, cash deposits are seen as the most common option.
However, this approach means that the deposit you hand over will be held in a third party account or trust until settlement. For off-the-plan purchases, this could be up to 3-5 years away.
That means tens or even hundreds of thousands of dollars may sit untouched during construction – unable to reduce loan interest, earn returns elsewhere, or support your broader financial goals.
This doesn’t make cash the wrong choice. But it does mean your deposit can have a broader impact on your financial position while the property is being built.
This guide looks at what that can mean in practice, so you can make an informed decision about how to approach your off-the-plan deposit.
Key takeaways
- Paying your off-the-plan deposit in cash is common, but it’s not the only option
- With off-the-plan purchases, your deposit is often locked away for up to 5 years
- This can limit your financial flexibility and prevent those funds from being used for savings, investments, or reducing other debt
- Alternatives like deposit bonds can help you keep funds accessible and working for you
- The key is to plan how you structure your deposit, not just how you fund it
Why most buyers default to cash deposits for homes
For most buyers, paying a cash deposit for a property is the default option.
Because cash is widely accepted by vendors, and it’s been the most common option for decades, most people don’t think twice about using this method to secure a property.
But with off-the-plan purchases, there’s often a long period between exchange and settlement.
During that time, your deposit remains inaccessible, which can have a broader impact on your financial position than you might expect.
Who typically buys off-the-plan properties?
Off-the-plan properties are popular with a wide range of buyers, particularly those planning ahead or looking for more flexibility before settlement.
This can include:
- First home buyers wanting more time to save before settlement
- Upgraders planning to sell an existing property closer to completion
- Investors looking to secure a property at today’s price while managing cash flow efficiently
- Downsizers who want time to transition from their current home
- Professionals and high-income earners using offset accounts or investment strategies to keep their money working during construction
For many of these buyers, preserving access to cash during the build period can be just as important as securing the property itself.
The hidden costs of using cash for you deposit
For many buyers, paying a deposit in cash feels like the only choice. It’s often just seen as “how it’s done”.
To get there, you might:
- Build up savings over time
- Sell an existing property or investment to free up equity
- Take on additional finance to cover the deposit
All of these approaches can work. But they also mean committing your funds upfront, often well before settlement.
Once your deposit is paid, that money is usually locked away for quite a long time. With off-the-plan purchases, that timing matters.
For many buyers, the real cost isn’t the deposit itself – it’s what that money could have been doing during the years before settlement. It also reduces your flexibility and limits how you manage your finances day to day.
Why tying up cash can work against you
It might feel reassuring to have your deposit ready in cash. But in a market where timing and flexibility matter, locking away $50,000, $100,000 or more for years may not be the right strategy for you.
That money could otherwise be sitting in an offset account, earning interest, or supporting other financial goals. Instead, it’s committed early and out of reach for the duration of the build.
So while having cash ready can feel like the “safe” option, it’s worth weighing that comfort against what you’re giving up over time.
Considerations when buying off-the-plan
When you buy off-the-plan, your deposit is usually held until settlement. How it is handled depends on the contract and the conditions of the purchase. In most cases, the deposit is held securely, but it remains committed for the entire build period. If you’re new to the process, it can be helpful to first understand what an off-the-plan property is and how these purchases typically work.
It’s important to be mindful of what could happen if circumstances change. For example, if a development doesn’t proceed or a developer becomes insolvent, the outcome will depend on the contract and how the deposit is held.
That doesn’t mean these situations are common, but it does highlight why it’s important to understand how your deposit is managed and what protections are in place.
It’s less about focusing on worst-case scenarios, and more about knowing what to expect so you can make informed decisions from the start.
A different approach: Using a deposit bond
If you’re looking for more flexibility, there are other ways to structure your deposit.
This is why many off-the-plan buyers consider using a deposit bond instead of paying the full deposit in cash upfront. Instead of paying the deposit in cash upfront, you provide a guarantee at exchange and pay the full amount, including the deposit, at settlement.
This can offer a number of practical advantages:
- Keep your funds available: Your savings can stay in your account rather than being locked away for months or years.
- Stay liquid: You can continue using your funds in offset accounts, investments or other financial strategies.
- Maintain flexibility during the build period: You’re not tied to a single financial position while waiting for construction to be completed.
- Reduce pressure on major financial decisions: You may not need to sell assets or restructure your finances earlier than planned.
- Feel more in control: With your funds still accessible, you can respond more easily if your circumstances change.
It’s about understanding that you have options, and choosing the one that works best for your situation.
What could you actually save?
When you step back from the upfront cost, the bigger question becomes: what happens to your money over time?
If your deposit isn’t tied up in cash, it can continue working for you during the build period. That can mean:
- Keeping savings in a high-interest account and earning interest
- Using an offset account to reduce the interest on your home loan
- Maintaining liquidity in your existing assets or property
- Staying in control of your finances while the property is being built
There’s also a non-financial benefit. Many buyers value the confidence of knowing their funds are still accessible, rather than locked away for an extended period.
Example: Keeping your deposit in an offset account
Imagine purchasing a $900,000 off-the-plan apartment with a 10% deposit.
That’s $90,000 potentially tied up for two years while the property is built.
If those funds remained in an offset account against a home loan charging 6.5% interest, the interest savings alone could exceed $12,000 over the construction period.
For some buyers, that can help cover moving costs, furnishing expenses, part of your stamp duty, or simply provide greater financial flexibility while waiting for settlement.
To bring this to life, here are some example scenarios showing how keeping your funds available could save you thousands over time:
| Purchase price | $600,000 | $1,200,000 | $1,800,000 | $2,400,000 |
|---|---|---|---|---|
| 10% deposit | $60,000 | $120,000 | $180,000 | $240,000 |
| Deposit Power fee (4 years) | $7,680 | $15,360 | $23,040 | $30,720 |
| Interest saved in offset (4 years) | $16,560 | $33,120 | $49,680 | $66,240 |
| Customer saving (offset) | $8,880 | $17,760 | $26,640 | $35,520 |
| Interest earned in savings account (4 years) | $15,625 | $31,250 | $46,875 | $62,500 |
| Customer saving (savings account) | $7,945 | $15,890 | $23,835 | $31,780 |
The financial benefit of keeping your money with you over the build time only improves in a higher interest rate environment.
Tools to help you estimate your savings
The impact of tying up your deposit in cash isn’t always easy to see upfront. That’s where the right tools can help.
This Savings Calculator lets you estimate how much you could potentially save by using a deposit bond instead of paying your deposit in cash at exchange. By entering a few key details, you can get a clearer picture of how keeping your funds with you until settlement might affect your overall financial position.
If you want to explore how to save or plan for mortgage repayments, these savings or mortgage calculators may help to see how your money could grow or reduce interest over the same period.
The goal isn’t to complicate things. It’s to help you understand there are options when it comes to paying a deposit, so you can make a decision that suits your situation.
Rethinking the role of a deposit
A deposit is often seen as a simple requirement. But in practice, it’s a financial decision that can shape your overall outcome.
How you structure and fund your deposit can influence your cash flow and how your money works for you over time.
That doesn’t mean there’s one “right” approach. But it does mean it’s worth looking beyond the default and considering what makes the most sense for your situation.
With off-the-plan purchases, the deposit isn’t just a formality — it’s a financial decision that can affect your cash flow and flexibility for years.
For many buyers, the question is no longer simply “How do I pay the deposit?” It’s:
“Do I want my money sitting idle during construction, or continuing to work for me until settlement?”
Understanding your options – including deposit bonds – can help you make a more informed decision about how to structure your purchase from the outset.
