Buying off the plan has lots of benefits, particularly if you’re an investor or a first home buyer. However, buying off the plan is a little different than buying an established property. Below we have put together three questions that you may want to ask when going through the process of buying off the plan.
Is buying off the plan cheaper?
Sometimes it can be, at other times it’s not. Some developers will discount their projects to ensure they sell quickly or to get rid of stock once a project is complete. Other projects are in popular suburbs or exclusive locations and the prices may come at a premium.
With regards to buying off the plan there are benefits if you’re a first home buyer due to the Queensland Government’s First Home Owners’ Grant. This sort of government incentive can provide a big leg up for those buyers looking for their first property.
What finance will I need?
This will depend on which type of property you’re buying. There are two different types of off the plan purchases.
The first type of purchase is to buy an apartment or townhouse off the plan. In this scenario the developer will build everything and you will simply move in when the building is done. It’s a very straightforward process with little for you to do once you’ve committed to purchase. With an apartment or townhouse you will usually only need to put down a deposit, commonly 10%, upon signing the contract. At this stage you should have spoken to a lender and either got an informal approval or at least an indication of what you will be able to borrow at settlement. When settlement is less than 3 months away, you can apply for formal approval from most lenders. Some lenders may require construction to be completed prior to settlement.
Alternatively, the second type of purchase is to buy a house and land package off the plan. With this type of purchase it is common to buy the block of land and then find a builder to construct the house. You’ll need to pay a deposit, again commonly 10%, for the land and pay stamp duty. Then, if you’re financing the build, you’ll likely need a construction loan which allows you to draw down funds in stages.
How long until I can move in?
Sometimes it can take around 2 years for an off the plan property to be completed! That’s a long time to be waiting for your new home. If your situation is one that doesn’t mind this sort of long wait then brilliant but if you’re working to a strict deadline this may become a stressful period for you.
On the contract of sale, there should be an expected time of completion for your new property. However, keep an eye out for a sunset clause in this contract. This clause will allow either the buyer or the developer to withdraw from the contract if the development isn’t finished on time. In Queensland, the maximum time period a developer can specify for a the sunset clause is up to five and a half years.
To make this process as seamless as possible, try to communicate regularly with the developer and get current timelines from them. By doing so you can be proactive with your plans and hopefully prevent any nasty surprises.