Useful Tips

Off the Plan Considerations

Every lender has their own terms and conditions, and this is intended only as a general guide to understanding this topic. Contact us to discuss your individual circumstances.

Definition
Off the Plan property is a property that has not yet been fully constructed. Some developers offer the chance for buyers / property investors to purchase a property before work has started.

Benefits
You save on Government Stamp Duties.
Customising the property to your personal needs and tastes.
New materials and equipment with warranties can make for better efficiency and lower maintenance costs.
Possible increase in property prices before you start paying back the loan.
Investors may be able to take advantage of tax depreciation benefits
Things to consider
Signing an unconditional contract to buy a property, often more than 1 year in the future has some inherent risks that must be considered.
They include, but are not limited to:
Reduction in the value of the property purchased if the general property market falls or if there is a flood of similar properties for sale at the same time.
Change in Lender credit lending rules and policies.
Reduction in your cash available to finalise the purchase (settle).
Reduction in equity in other property which you may need to settle.
Change in your personal employment and/or income position.
Increase in interest rates will reduce your maximum borrowing power.
Consider your options if the developer goes bankrupt prior to completion.

Loan considerations
It often isn’t possible to get unconditional approval prior until the off-the-plan property is close to completion (1-2 weeks prior)
You may have to apply for a loan about 6-8 weeks prior to certificates of occupancy being issued. Lender policies that are current may then will take precedence over any pre-approval you already had in place.
The lender Loan to Valuation Ratio (LVR) may be calculated on the lower of contract purchase price, or the valuation close to the time of completion.

(see also EquityVision Tips – Construction of a Property)