What is an “Off the Plan” Purchase?

An off-the-plan purchase is a type of property purchased before the building even begins. Essentially, you are buying the property off of the information provided on the building plan. These types of purchases are popular among investors because they can save them money. In addition, their investment may increase in value before they can rent out the home. 

Should you purchase an off-the-plan property?

While off-the-plan properties have increased in popularity, they are not a wise investment for everybody. There are several risks associated with these properties. The following borrowers are more likely to be approved for off-the-plan home loans:

• High net worth investors
• Second-time homebuyers
• High-income borrowers with a deposit larger than 20% of the purchase price

How to apply

If you plan to purchase this property type, you should apply for a formal loan approval when there are fewer than three months until your settlement date. Waiting to receive formal approval allows the property to be close to completion, allowing your lender to get a more accurate property valuation. When they assess your loan application, banks will use the projected market value of the property. This value will be used to set your LVR, your lender’s mortgage insurance premium and the final loan amount. 

Banks and other lenders usually have loan limits for off-the-plan purchases because of some risk involved and the property value can change between the design and the completion. If you are interested in applying for an off-the-plan loan, the brokers at Mortgage House can help you strengthen your loan application. As an experienced, non-bank lender, our brokers can find you a loan that fits your situation.