Buying OTP & Loan Repayments?

[azzae89]

Quick question for you finance gurus:

If I borrow money to buy off the plan, do I have to start paying off the loan even before the property construction is completed?

i.e. If I buy OTP now, yet it's not due to be finished until December, will I have been paying off my loan from now through til then? Or is there some sort of arrangement that can be made with the lender that I don't pay til its complete?

Reason I ask is that I want to buy OTP as an investment and don't want to have to pay off my loan without the help of tenants!

Cheers!

 

[Propertunity]

You only pay a 5% or 10% deposit or no deposit and a Deposit Bond when you sign to buy it. The loan is not fully drawn down until settlement when it is built.

 

[tobe]

Take some more advice, I wouldnt recomend OTP usually.

No, you dont have a loan until the proeprty is finished, and you have tenants in. You might need to pay interest on the 10% deposit if you borrow this.

The risk is the value of your OTP might change before settlement, or the banks rules, or your own personal circumstances, which means you might not get a loan, but you are still liable to pay the developers.

 

[Shahin_Afarin]

Aside from whether OTP is a good investment vehicle or not - negotiate a 5% deposit instead of the standard 10%. I have yet to seen someone get knocked back.

I am definitely not a fan of OTP but I'm surprised by how quickly construction is going up for these properties.

 

[Aaron_C]

There is no loan until the property is finished.....so no repayments to speak of.

 

[Jamie M]

Work out which mode of deposit will be cheapest for you.

If using borrowed funds to cover the deposit - compare the costs over time compared to a deposit bond or bank guarantee.

I agree with Shahin and Tobe on OTP properties - you really need to weigh up the pros and cons.

Cheers

Jamie