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Home loan for off the plan

Posted: Mon May 03, 2010 11:17 am
by zachsaw

We'd like to buy a property off-the-plan (10% deposit and 90% upon completion). It is a house that has not yet been built that you will purchase when the developer has completed construction. The plan of subdivision has not been registered. Settlement date is 14 days after the vendor the subdivision has been registered and occupancy certificate has been obtained, but not before April 2011 (it's in the contract).

Assuming I have pre-approval that is still valid, is 14 days enough time for the banks to get the funds ready for settlement?

Re: Home loan for off the plan

Posted: Mon May 03, 2010 11:57 am
by Otto Dargan
Hi Zach,

I would expect that they would need more than 14 days! I would allow up to 3 - 4 weeks to make sure it is done in time. The best way to do that is to get notice from the developer when they lodge the plans for registration. Usually that is done at the end of the development however that can vary depending on the development, discuss with your conveyancer for more info on how to know when to go for formal approval for your finance.

Please be aware that no pre-approval is valid for more than 6 months. All off the plan purchases are "at your own risk" to a certain extent as if the lender changes their guidelines or the valuation on completion does not match the purchase price then you can find yourself at settlement with no loan!

Make sure you keep evidence that you have saved / held your deposit as you may need to prove this when you apply for formal approval. Generally a 3 month bank account history is enough to prove genuine savings.

Good luck!

Re: Home loan for off the plan

Posted: Mon May 03, 2010 12:26 pm
by zachsaw
Thanks for the detailed reply. Appreciate it.

Just one other question. At what stage of the development would the bank require as a minimum to do valuation (e.g. wall and roof are completed) to give us a formal approval? This is just in case the developer applies for occupancy cert and registration of subdivision while the little things like kitchen top and floor boards aren't done, with the anticipation that they'll be completed while waiting for O.C. and subdivision.

Re: Home loan for off the plan

Posted: Mon May 03, 2010 12:40 pm
by Otto Dargan
Generally the valuation should be completed when the property is complete entirely. If there are a few minor things such as the stove or some landscaping then that would usually not be a problem however the property needs to be "livable", as in someone could move in as it is.