Buying off-plan property in London - Stage payments explained

Learn how buying off-plan property in London with stage payments works: from reservation fee to exchange deposit, milestones and final handover.

Do you have to pay the full price of a London home before it is even built?

No, this is the main appeal of buying off-plan in London. It comes with staged payments, which means that the buyer needs to pay in steps, over months or even years (in some cases) and the final balance is only due when the keys are handed over at completion. For overseas buyers, including Thai nationals, this structure makes planning much easier. Spreading the cost across stages improves cash flow and gives you time to arrange overseas transfers.

This guide covers how the reservation fee, exchange deposit, milestone payments and final payment work. We will highlight the key terms to know and what to check before you commit.

What does "off-plan" mean?

Off-plan means you buy a home before the construction is finished. You can choose the home from floor plans, a show home and computer images. The developer often builds the property while you wait for handover.

With off-plan, because you pay before construction finishes, the purchase can feel different from buying a finished home. It also needs a little more planning. If you want wider background first, our London property investment insights cover the market for Thai buyers.

The London off-plan property payment schedule (step by step)

Every developer sets its own terms; most London off-plan property payment schedules follow the same basic order.

Reservation fee

You pay a fee to take the home off the market and reserve it. This fee secures the chosen unit while your solicitor reviews the contract.

Under the Consumer Code for Home Builders, you can cancel within 14 days of signing the reservation agreement. You also get the fee back. Read the terms before you pay.

Exchange deposit

Usually, it is 10% to 20% and is the first big payment. At exchange, the contract becomes legally binding. If you cancel after this point, you may lose the deposit.

Milestone payments (during construction)

Some developers can ask for one more payment while the building goes up. This is usually linked to a build stage, such as when the main structure is finished.

Not every scheme works this way. Many developers ask for nothing more until completion. Your contract will clarify which applies to you.

Final payment (at handover)

You pay the remaining balance at completion. This is when the property is legally transferred to you.

If you have opted for a mortgage, the lender releases the funds at this point.

Exchange deposit timeline for off-plan property in London

The exchange deposit timeline usually looks like this:

• Reservation: you pay the fee and your solicitor receives and reviews the contract.
• Exchange: normally done within 28 days of reservation. You pay the deposit at this stage.
• Construction: this can take from several months to a few years. It depends on the scheme.
• Completion: the developer gives you notice that the home is ready. You then usually have around 10 working days to pay the balance.

Key terms used often in off-plan transactions

Because contracts use legal language, these are some of the terms you will meet most often.

Exchange of contracts: the moment both sides sign and the deal becomes binding. Your deposit is paid here.

Longstop date: it is the latest date by which the developer must finish. If the home is not ready by then, you can withdraw and reclaim the deposit. Ask your solicitor to confirm this clause before exchange.

Practical completion: the building work is finished and the home is fit to live in. Small defects may remain. These are called snags and it is better you get them checked before you complete.

Valuation before handover: if you use a mortgage, the lender values the finished home close to completion. In case the value comes in lower than the price you agreed at exchange, the lender can reduce the loan. You would need to cover the difference yourself. It is worth planning for this early.

Why overseas buyers choose stage payments

First and foremost, because the payments are spread out. A buyer doesn't need the full amount on day one, which gives them time to arrange funds.

The price is locked in at exchange. Stamp duty is also worked out on that agreed price.

There is potential for capital growth. If the local market rises during construction, the home may be worth more by handover.

But this is not guaranteed.

Prices can also fall, so this purchase suits buyers with a longer time horizon.

What else should you check?

Before you commit, run through these points:

Deposit protection.

The developer should explain how the deposit is protected. Ask for this in writing.

Build warranty.

Many new homes come with a structural warranty, such as NHBC. make sure you confirm what yours covers.

Mortgage timing.

Standard mortgage offers can expire before a long build ends. Speak to a lender early about how long your offer lasts.

The valuation gap.

Ask your lender how much cushion you would need if the final valuation is lower than your purchase price.

Taxes.

Overseas buyers pay a 2% stamp duty surcharge. An additional 5% surcharge can apply if the home is an additional property. SDLT is paid within 14 days after completion.

A solicitor with new-build experience. They will review the contract, longstop date and payment terms.

Wondering which developments offer a payment plan that suits your budget? Browse the latest London property developments to compare options.

How Benham and Reeves Thailand can help

Reading an off-plan contract for the first time can be complicated. That is where local support helps.

Benham and Reeves has been a London sales and lettings agent since 1958. Our Thailand office works directly with our London branches, so you can speak with us in your time zone.

We can help you:

• Compare payment schedules across different developments.
• Understand what each stage means for your cash flow.
• Plan for the final payment and valuation gap.
• Look after the home once it is complete, along with lettings, property management and UK tax support for overseas owners.

A short conversation can save you a lot of guesswork. Book a consultation with our property advisors and we will walk you through the payment stages and costs as per your budget.