Looking at buying new and off the plan?
If you’re thinking about buying a new home, you might have considered purchasing one that doesn’t actually exist yet. Building activity has picked up a lot in recent years, and there are new housing developments around the country offering buyers a selection of newly built homes.
But what are the pros and cons of buying a house “off the plans”? Here are a few things to think about.
Lending
It can sometimes be easier to get a mortgage on a house that is under construction because the loan-to-value rules do not apply. Banks do not have the same restrictions on the amount of lending they can advance to people with a smaller deposit – provided those borrowers are buying homes that are still being built, or are being purchased from the developer within six months of completion. You can also get a bigger First Home Grant if you qualify for this – click here to learn more.
Make it yours
When a house is still being constructed, you have an opportunity to tweak the design to fit your needs. You can choose the colours you want it painted and the curtains and carpets, and sometimes you can also change the layout.
While you usually have to choose your options from the builders selection to stay within the quoted price (other choices may be available at an additional cost), buying off the plan still allows you a good degree of customisation. It can be a great feeling to walk into a house that is exactly as you wanted it, knowing that you’re the first people to live there.
Delays
One of the biggest headaches for people who are buying a new property is that the time it takes to build can increase a lot. We saw this when Covid-19 interrupted supply chains and created delays for many builders. While a typical build could take about six or nine months, it’s not uncommon to have to wait longer than that. You’ll need to have a backup plan for how you would cope with delays – it helps if you have somewhere you can live rent-free in the meantime.
Sunset clauses
You might have seen media reports of people who have had their new-build contracts cancelled because of a sunset clause. These clauses are designed as protection if a project takes longer than expected. Depending on how they are structured, they can either give the buyer or both the buyer and the developer the ability to back out if things have not progressed sufficiently by a certain point. It’s important to talk to your lawyer about any agreement you sign so you fully understand how these sorts of clauses could apply.
Increases in construction costs
Sometimes, the cost of building increases in a way that the builder or developer cannot control. Some contracts give them the right to pass on a certain amount of this increase, and some do not. It’s important to understand how yours works and what increases beyond the price you’ve agreed upon you might face. If the developer does not have the ability to pass on construction cost increases, that can mean it’s harder for them to finish the project.
Check out the developer
Do a background check on any developer or builder you are thinking about signing up with. A simple Google search should show you the projects they’ve been involved in, in the past. Commercial credit bureau CreditWorks recently launched CheckMate, a tool that allows people to run a credit check on any companies they are considering working with.
Like to talk?
Signing up for a new build can be an exciting time. We can help you get your finance sorted so that you are free to focus on the construction of your dream home. Give us a call today.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.