All Topics / Help Needed! / Finance clauses when buying property off the plan

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  • Profile photo of emjoyemjoy
    Member
    @emjoy
    Join Date: 2003
    Post Count: 8
    June 7, 2007 - 6:58 am

    Hi All,

    I'm very inexperienced at this and desperately seeking advice!

    I'm buying a property off the plan, which is part of a development which won't be completed for 3 years (roads have to be built!).  A 10% deposit is being paid to secure the property now, with the balance due on completion/settlement in 3 years.

    To ensure my contract is subject to finance approval, I have to arrange finance approval now.  But, I'm unsure exactly what the procedure is for that when the property is not even built.

    Does this mean I apply for the full home loan now, although I don't pay for the balance for 3 years?!  I didn't think a bank would approve a loan for a house that wasn't even built!  Or let the money for the property sit in the bank until we settle!

    OR,

    Do I obtain pre -approval for the loan?  From what i understand with a pre-approval, they are not valid for longer than 3-6 months (or 12 months at max)

    I asked my solicitor the above and he said he hadn't come across it before, but with people buying off the plan frequently, there must be a way!

    Also, if i get a pre-approval/finance letter from a bank, does that lock me to that bank at settlement?  I imagine in 3 years all sorts of loans would change/rates change and it might not be good to lock myself in now!

    I'd appreciate any advice!

    Thanks,
    Emma

    Profile photo of hookstarhookstar
    Member
    @hookstar
    Join Date: 2004
    Post Count: 7
    June 7, 2007 - 11:18 am

    hello emjoy
       when i purchased off the plan in 2002 i know i paid a 5% cash deposit and it was not until about 6 months before settlement that i organised my finance. but in saying that be careful your circumstances dont change from when you put the deposit down to settlement (like loose your job) otherwise organising finance may become difficult.
                       cheers

                              kale                       

    Profile photo of Kipper57Kipper57
    Member
    @kipper57
    Join Date: 2006
    Post Count: 252
    June 8, 2007 - 3:11 am

    An alternative would be to arrange a Deposit Guarantee which would have a fee, however would save you having your own funds locked away for such a period.  Conditions apply such as you would need to have equity in another property, this is more for your protection as if your situation changes down the track you will still have to come up with the deposit whether or not you go ahead.  Feel free to contact me for more information on this product

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