Buying off the plan is a term that refers to purchasing a property based on its building plan, prior to its actual construction. While buying off the plan offers a number of advantages to home owners, it also comes with some potential risks. To help you weigh up your choices, here is a list of pros and cons for you to consider when purchasing your new home off the plan.
The pros of buying off the plan
Smaller price, small discount
Usually the price of buying off the plan is lower than the price of the property once the property is built. Think of it as an early bird special.
Save more, borrow less
You won’t be required to pay the full purchase price until the property is completed. This appeals to a lot of people who would prefer to continue saving while the house is being built and take out a smaller mortgage.
Depending on what state or territory you live in you might be eligible for tax benefits or stamp duty exemptions when purchasing off the plan. These savings help lower your mortgage amount, so it’s worth checking whether you qualify.
Design your own home
Another appealing aspect for a lot of people is the ability to contribute to the design of the house including furnishings, flooring options, wall colours and appliances. This gives home owners the chance to style the house in a manner that suits their tastes.
The cons of buying off the plan
Buying blind
It’s not uncommon for buyers to want to be able to see the home they’re buying. People like to get a feel of the place they’re purchasing and committing to live in. For a lot of people, the plan simply isn’t enough for them to envision what their home might look like once it’s completed.
At the mercy of the developer
You should be aware of the reputation and track record of the developer. While newer developers might be able to offer lower deposits on properties, they may also struggle more than experienced developers when it comes to getting the development funded. Research your developer to avoid losing your deposit and ending up with no property.
Sale contract fine print
Always check your sale contract carefully. It may also be wise to consult a legal professional to make sure you understand what is and what isn’t being covered. Some contracts may require you to put up more money if the development costs blow out. It’s good to be prepared for all possible outcomes.
The always changing property market
As the property market changes so does the potential value for the property you’re purchasing. This might mean that the capital growth in property value or rental yield could be less than you expected when you put down the initial deposit.
While this might not affect you if you want to live in your property, it’s something to consider if you’re buying an investment property.
Get the right advice
If you’re considering buying off the plan, Choice Home Loans can find you the right broker. Our experienced team of brokers know the home loan market back to front and can help you decide on a loan product that is right you and your financial goals. Make an appointment online to talk to one of our friendly brokers today.
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