If you’re buying a property off the plan, you agree to a fixed price when you exchange contracts — often a year or more before the building is finished. Your lender doesn’t rely on that price when it’s time to settle. It orders its own valuation of the completed property, and if that valuation comes in below what you agreed to pay, your loan is based on the lower figure — not the price you’re contractually obliged to pay the developer. The difference between the two is a cash gap you have to cover yourself, on top of whatever deposit you’ve already paid.

This guide walks through why that gap can open up, how it changes what a lender will actually advance you, what your options are if you’re short, and what to do before you sign to plan for it.

What does “valuation falling short at settlement” actually mean?

Two separate numbers are in play, and they’re set at different times by different people. The contract price is what you and the developer agreed to at exchange — a private commercial agreement, fixed for the life of the contract. The valuation is a separate, independent assessment your lender commissions close to settlement, used for one purpose only: deciding how much it’s willing to lend against the finished property.

Those two numbers don’t have to match. If the valuation comes in under the contract price, the developer still expects the full contract price at settlement — nothing about your obligation to the developer changes. What changes is how much of that price your lender will fund.

Why can the valuation come in under the contract price?

Off-the-plan buying means a long gap between exchange and completion — sometimes years — and a valuer assesses the finished property using evidence available near settlement, not the contract you signed earlier. In practice that means recent sales of comparable completed dwellings around that time, not your original agreed price.

Where a development (or several nearby) settles a large number of similar dwellings around the same time, the valuer may be working from a cluster of very similar, recently completed sales rather than a broader spread of listings. That’s a point about which comparable evidence a valuer draws on — not a claim about which way any specific valuation, building or area will land. Nobody, including this guide, can tell you in advance whether a particular off-the-plan property will value at, above or below its contract price; that’s an independent professional judgement made property by property, at the time.

How does a lower valuation change what your lender will actually advance you?

Lenders generally base the loan amount on whichever figure is lower — your contract price, or their own valuation — so a lower valuation directly reduces how much you can borrow against that price, even though your obligation to pay the full amount doesn’t change. Exactly how a lender treats a shortfall, and what maximum loan-to-value ratio (LVR) it’s prepared to lend at, is a lender-by-lender policy decision set within the same overarching prudential and responsible-lending framework that applies to both investor and owner-occupier loans — not a single market-wide rule (investment-loan-regulatory-framework).

One threshold is published and consistent, regardless of lender:

Loan-to-value ratio (LVR) = loan amount ÷ property value × 100

As at July 2026, Moneysmart states that lenders mortgage insurance (LMI) usually becomes payable once LVR is above 80% — and that trigger isn’t published as different for investors versus owner-occupiers (lmi-lvr-benchmark; lmi-investor-parity). LMI protects the lender, not you, if you later default.

Illustrative example only — not typical figures, dated July 2026:

Item	Amount
Contract price agreed at exchange	$650,000
Loan the buyer planned to need	$520,000
LVR against the contract price (planned)	80.0% ($520,000 ÷ $650,000)
Lender’s valuation at settlement	$600,000
LVR against the lower valuation	86.7% ($520,000 ÷ $600,000)

In this illustration, a loan planned to sit right at the 80% LVR line moves above it once measured against the lower valuation — the point, as at July 2026, where Moneysmart says LMI usually starts to apply. No authoritative source publishes a standard LMI premium (lmi-premium-ranges); if it applies, your lender or broker will quote the actual cost for your specific loan, and Helia (a mortgage insurer) publishes an online LMI fee estimator you can use to get a general sense of the range beforehand.

Even where the loan is still approved, the mechanics are the same: you still owe the developer the full contract price at settlement, but the amount your lender will hand over is capped against its own valuation — and the difference is the shortfall you’d need to fund another way.

What are your options if there’s a gap between the valuation and what you owe?

There’s no single right answer here — it depends on your finances, your contract and your lender’s specific policies. Buyers facing a shortfall generally weigh some combination of:

• Funding the gap in cash — from savings, family, or another source — on top of the deposit already paid.
• Checking with a broker whether a different lender would value the property differently, or lend a higher proportion against it. Valuation outcomes and lending policy both vary by institution.
• Querying the valuation — some lenders allow a formal review or a second valuation, though this is a lender-specific process, not a right that applies everywhere.
• Raising it with the developer or vendor — occasionally sellers are willing to discuss the situation, though the contract price itself doesn’t change unless the vendor agrees in writing to vary it.
• Reworking the finance structure with a broker — a different loan product, accepting LMI, or a guarantor, if that suits your circumstances.

A mortgage broker can work through the finance options against your actual numbers, and a solicitor or conveyancer can tell you exactly what your specific contract allows.

What happens if you can’t close the gap by settlement?

This is squarely a question for your specific contract, not a general rule this guide can answer safely. Off-the-plan contracts vary in what they say about finance, valuation risk and what happens if a buyer can’t complete — and the consequences of not settling can be serious. Rather than guess at a mechanic that differs contract to contract and state to state, the honest answer is: read what your contract says (or have a solicitor or conveyancer read it for you) before you sign, and talk to that same professional the moment you suspect a shortfall might be coming — well before the settlement date, not after.

How can you plan for this risk before you sign an off-the-plan contract?

None of this is a reason to avoid off-the-plan property altogether — it’s a reason to plan for a scenario that established-property buyers largely don’t face, because an established property is valued right before settlement, not years earlier. Factors buyers commonly weigh, without any one being the “right” move for every buyer:

• Getting an independent valuation or a second opinion before you exchange, to go in with more information than the contract price alone — not a guarantee of what a lender will assess later, but a data point.
• Setting aside a cash buffer beyond the minimum deposit, specifically earmarked for a possible shortfall, rather than assuming the loan will cover the rest.
• Asking a mortgage broker to pre-assess your finance across a range of possible settlement valuations, not just the contract price.
• Having a solicitor or conveyancer review the contract’s finance and settlement provisions before you sign — not after.

Is there a way to add property exposure without this specific risk?

This risk exists because you’re contracting today for something a lender won’t value until it’s built, often years from now. Fractional investing works on a different mechanic: with MyBrix, you take an economic interest in a property that already exists and has already been valued (as at July 2026), rather than a yet-to-be-completed construction contract — see our guide to how MyBrix works. That removes this particular settlement-valuation-shortfall mechanic specifically, though fractional investing carries its own risks, covered in our guide to the risks of fractional property investing — it isn’t a substitute for buying a property outright if that’s the path you’re set on.

The bottom line

An off-the-plan contract price is fixed the day you sign. A lender’s valuation isn’t decided until much closer to settlement, and if it lands below your contract price, the shortfall is yours to fund — the developer’s price doesn’t move, and neither does your obligation to pay it. That’s a structural feature of buying something years before it’s finished, not a sign anything has gone wrong with a particular purchase.

Off-the-plan buying is one path into property investment among several. Our guide to what property investment actually involves sets out the fuller range of costs and risks across property investing generally — off-the-plan or otherwise — and a mortgage broker and a solicitor or conveyancer are the two professionals best placed to work through this specific risk for your own contract and finances.