How to finance a property bought on a put and call option

How a put and call option deed works

A put and call option is a deed between a buyer and a seller. It's usually called a put and call option deed, or simply an option deed. The buyer pays an option fee for a call option, which is the right to buy the property at an agreed price within a set period. The seller gets a put option, which is the right to make the buyer purchase if the buyer doesn't exercise the call option in time. The contract for sale is usually attached to the deed and becomes binding when either option is exercised.

In practice it works like a contract with a delayed start. The buyer gets time to arrange finance, approvals or a sale. The seller gets certainty that the deal will go ahead. The option fee is often credited towards the deposit or the price, but that depends on the deed.

Why buyers and developers use them

• Development sites: A developer can secure a site while a development application is assessed and only commit once approval comes through. (Construction & development finance)
• Off-market and house and land deals: Some sellers and builders prefer an option to a standard contract because the buyer is locked in once the option period ends.
• Buying before you sell: An option can give you time to sell your current property before you're bound to buy. (Bridging finance)
• Buying through a company or trust: The deed may let you nominate another buyer such as your company or trust. That can trigger extra duty, so plan it with your accountant and solicitor before you sign.

Why finance timing matters more than usual

A put and call option usually has no finance condition. If you don't exercise the call option before it expires, the seller can exercise the put option and you're bound to buy anyway. That makes the option period your window to get finance approved.

From the credit side, a lender needs time to work through four things.

1. The deed and the contract: Credit reads the option deed and the attached contract to check the price, the settlement date and who the buyer will be.
2. The valuation: The valuer looks at the property when the valuation is done, not when you signed. If the market has moved during a long option period the valuation may come in under the price, and some lenders lend against the valuer's figure and not the purchase price.
3. You and the structure: If you plan to nominate a company or trust, the loan needs to be in that name and credit will want the entity documents. Changing the buyer late can mean starting the assessment again.
4. Formal approval: Aim to have formal approval before the call option period ends. Pre-approval usually doesn't include a valuation or a full credit assessment, so it isn't enough on its own.

How duty applies in NSW

Signing an option deed isn't the same as exchanging contracts. The contract for sale is attached to the deed but only becomes binding when you exercise the call option or the seller exercises the put option. That's the point contracts are treated as exchanged.

In NSW, stamp duty applies at both steps. When you sign the option deed you pay duty on the call option fee. When the option is exercised and contracts are exchanged you pay duty on the full purchase price, which includes the option fee. The duty you paid when you signed isn't taken off.

Example: You sign a put and call option deed on a $1,000,000 property and pay a $20,000 option fee that counts towards the price. When you sign, duty on the $20,000 fee is about $255. When you exercise the call option and contracts are exchanged, duty on the $1,000,000 price is about $39,187. In total you pay about $39,442, which is $255 more than buying the same property on a standard contract. These figures use the 2026/27 general rates before any concessions.

Nominating someone else to buy can add more duty, and if you exercise more than 12 months after signing, Revenue NSW will want a valuation. Your solicitor or conveyancer will work out the exact amounts.

Build the duty on the option fee into your budget. Lenders will want to see where the rest of your contribution is coming from.

Cooling off on residential options

For residential property in NSW, cooling-off rights apply when you enter the option, not when it's exercised. Changes in 2025 confirmed this for both put and call options. Once the cooling-off period has passed the option fee is usually non-refundable, so have your solicitor review the deed before you sign.

Before you sign an option deed

• Talk to us early: Check what you can borrow and which lenders will accept the deal before you pay the option fee.
• Match the option period to the finance: Allow time for the valuation and formal approval, plus a buffer.
• Decide who the buyer will be: Settle the structure before you sign so the loan and the duty line up.
• Know where the option fee comes from: Lenders usually count it towards your contribution if it's credited towards the price. Keep the receipt and the deed.
• Get legal and tax advice: Option deeds vary. Your solicitor should review the deed and your accountant should confirm the GST and duty position.

Work with your solicitor

Your solicitor looks after the deed, any caveat to protect your option and the duty return. We line up the finance so the option period works for you and the loan is approved before you're committed.