Buying off the plan apartments is a very different process to a normal property contract. We always recommend our clients to seek legal advice before signing a contract but here are some key tips and considerations about the process of buying off the plan.
Know your deposit amount
Buying a property off the plan usually requires up to 10% deposit, this is usually held in a legislated trust account and invested until settlement.
An important consideration with your deposit is the time it will be tied up from the initial payment through to completion of the property as this can be a few years and subject to delays. Here at Focus we can help organise your deposit and manage the payment process for you.
Get pre approved
Most off the plan purchases do not have a subject to finance clause, this essentially means they are cash offers. This is something that is often overlooked when a prospective purchaser is excitedly looking at signing a contract for a shiny new apartment and a key reason why it is important to get legal advice on any contract being signed. Although getting pre-approval for an off the plan purchase with such a long lead time is not suitable, you should meet with your finance broker to review your capacity and options giving you peace of mind that your loan will be ready to go before shopping for a property or signing a contract.
Finance time
Traditionally, banks and lenders will lend against the contract price however with off the plan they will value the property when completed and this amount could vary from the original contract price (either more OR less). This is the value the bank will allow you to loan from and so you must ensure you have sufficient financial capacity to allow for any variations of this value.
You will need to check with your lender that finance approval can be obtained early whilst the project is being completed when buying off the plan. You will also need to ensure any changes in your personal financial circumstances do not restrict your chances to obtain finance.
Finalising your loan
Around eight weeks prior to settlement, your broker will prepare and lodge your complete home loan application which will assist your loan becoming unconditional at this stage. Once you have signed and returned the loan documents to the lender, settlement is the last step of the process.
Risks
As noted above prior to settlement, your lender will need to value the property. If there is a shortfall between the original contract purchase price and the banks value of the property you may need to cover the shortfall.
The shortfall can happen for various reasons. A change in property valuations, a change in credit policies or rising interest rates which may reduce your borrowing capacity. There are several options available for you to cover this shortfall.
Buying off the plan with the right conditions can be a great investment choice, however before signing a contract, ensure you speak to a financing specialist.
Here are Focus we are available for no obligation consultations, we will be happy to advise and support you through this process. Click here for more information.