Off The Plan Home Loan

Many home buyers and investors choose to put down a deposit on a unit or townhouse before a single brick has even been laid.

These ‘off the plan’ purchases are a popular choice because the buyer will often get a significant discount below the market value and the property may appreciate in value before settlement occurs.

How much can you borrow?

  • First home buyer: 95% of the property value (restrictions apply).
  • Investor: 95% of the property value.
  • Low doc: 80% of the property value.
  • Discounts: Competitive professional package and basic loan discounts are available.
  • Long term approvals: One of our lenders can approve your loan up to 18 months before settlement.

Please call us on 1300 889 743 or complete our free assessment form and one of our mortgage brokers will let you know where you stand.

Don’t forget to read our tips on buying a property off the plan.

When can I apply for my mortgage?

More than 18 months until settlement

You cannot apply for your mortgage if settlement is over 18 months away. You’ll need to apply for your loan within a month of settlement and if you cannot get approval, you may default on your contract and lose the deposit that you have paid.

You should only consider this option if you are in a strong financial position, you are borrowing less than 80% of the property value and you have obtained independent legal and financial advice. Please talk to us before you sign the contract of sale.

3 – 18 months until settlement

Most lenders can issue a pre-approval at the time you sign the contract however, by the time settlement comes around they will want to reassess your loan application in full.

If your situation or the lending criteria has changed then you risk being declined and possibly losing your deposit.

One of our lenders can issue a formal approval if there is less than 18 months until settlement. This gives you the confidence to enter into the purchase contract knowing that your finance is secure.

The lender will complete a valuation based on the plans provided by the developer. They may require an updated valuation prior to the settlement of your property.

Please call us on 1300 889 743 or complete our free assessment form and one of our mortgage brokers will help you to get approved.

Less than 3 months until settlement

When the building is close to completion you can apply for formal approval with more lenders. Some lenders will require the building to be complete before they order a bank valuation whereas others can approve the loan as long as the building is close to completion.

The lender will ask for a certificate of occupancy prior to settlement, which is typically issued by the developer two weeks before settlement is due.

Don’t apply for your home loan at the last minute!

Valuation or purchase price?

With a normal purchase, banks tend to use the lesser of the purchase price or valuation when determining how much you can borrow.

However, with an off the plan purchase, it is not uncommon for more than 12 months or even several years to have passed between when the price was agreed and when the settlement occurs.

Because of this, some banks will use the market value rather than the purchase price when assessing your loan to value ratio (LVR), lenders mortgage insurance (LMI) premium (if applicable) and final loan amount.

Can I get multiple valuations?

Some people choose to get valuations from multiple lenders and then apply with the lender that has the highest valuation.

This can allow them to borrow more money or reduce the LMI premium they would pay.

In theory, this works just fine but in practice most lenders require you to apply for a loan before they will do a valuation.

If you apply with multiple lenders then you are almost certain to fail their credit score due to having too many enquiries on your credit file.

Luckily, some lenders can allow you to order a valuation prior to submitting a loan application! This allows us to get around these problems.

Call us on 1300 889 743 or complete our free assessment form and we can help you to order a valuation prior to applying for a loan.

Off the plan house & land packages

Apartments aren’t the only properties that can be purchased off the plan.

You can buy vacant land off the plan as well as a house and land package off the plan. The valuation process is different and the bank criteria can vary so please speak to one of our brokers before entering into a contract.

Vacant land is notoriously difficult as it isn’t always possible to get a reliable approval a long time before settlement. Bottom line: you are taking a risk.

Why are the banks so conservative?

Banks tend to be more conservative with off the plan sales because, in some cases, properties are sold for more than they are worth and the bank valuers have failed to notice the discrepancy.

Although you may make a small fortune from your investment, the bank doesn’t share your profit, they are only concerned about their risk.

As a result, many banks tend to limit their loans to 80% of the property value or will not approve your loan if settlement is a long time away.

By using a mortgage broker, you can find a lender that is willing to take a common sense approach to your off the plan purchase.

Tips for buying an off the plan property

What do you need to be aware of before you buy a property off the plan?

  • Look out for two tier marketing: In some cases there is one set of prices for local buyers and higher prices for interstate or overseas investors.
  • Beware of sophisticated marketing: If the developer has spent a fortune on marketing then the price may be temporarily inflated.
  • Don’t buy new just for the government grants: Consider all property types and use our first home owners grant calculator to check your eligibility for grants.
  • Use a professional investment firm: Our mortgage brokers can put you in touch with several reputable companies that can find you a good investment property.
  • Investing in Australia is different: The types of properties that perform well in Hong Kong or London don’t suit the Australian market. Research what works well in Australia or talk to our mortgage brokers.
  • Is the developer reputable?: Research the development and the reputation of the developer searching for them online.
  • Research the property value: Look at comparable properties that have sold in the last six months that are not in the same development that you are buying in. Use this guide to find out how.

If you aren’t sure about the development that you are buying in or the developer that you are buying off, call us on 1300 889 743 or complete our free assessment form and we can give you feedback or put you in touch with one of the developers that we trust.

Apply for an off the plan mortgage

Do you need help to get your home loan approved? Do you need help to find a reputable developer selling fairly priced properties?

Please call us on 1300 889 743 or complete out free assessment form and one of our mortgage brokers will help you to choose a suitable lender and loan product.