You’ve probably heard a hundred horror stories about buying off the plan: including developers going bankrupt and finished homes being completely different from what was expected. As a result, you may believe that buying off the plan is an incredibly bad idea, but this is not always the case.
In fact, buying off the plan works out great for a lot of people, it’s just that you only ever hear the horror stories. Let’s have a closer look at the pros and cons to help you decide whether this type of purchase is right for you.
One of the biggest benefits of buying off the plan is that doing so may require a smaller deposit – perhaps even as low as 10 per cent without lender’s mortgage insurance. This will allow younger, less capital rich buyers to afford a home loan and get into the market in something new and liveable.
Additionally, buyers may enjoy large capital gains on these properties while they are being built. Apartments in Australia generally show decent value growth year on year, so this could mean that buyer’s equity increases markedly before a single mortgage repayment has been made.
Lastly you may even be eligible for stamp duty concessions depending on what state you live in – which could save you a lot.
The much lamented cons of buying off the plan include the developer going into liquidation. This will tie up your deposit for a long period of time and may mean that you leave the purchase with nothing, or have to spend more to get your home finished.
On the other hand, the project may get to completion without a hitch only to walk into a property that looks completely different than the plan. This event is the nightmare scenario for most off-the-plan buyers and should be avoided at all costs.
Minimising your risks
The drawbacks of buying a property off the plan can be considerable, however the many potential benefits may make it worthwhile. To minimise your risk, it’s a great idea to do extensive research into the developers, the contract and the plan itself.
Look into the history of the developers to see if they’ve had issues in the past with developments. Consider hiring a conveyancer to look closely at the contract for anything that could increase the potential risk.
Lastly it’s a great idea to ensure your finances are in order so that you have a little wiggle room just in case something goes wrong. Our experienced mortgage brokers can help you with this, making the entire process easier and far less risky.