Getting Finance FHOG - Buying off the Plan - Why so difficult?

[eyogina]

Hi All
I am just after any advice/experience, for obtaining finance for buying off the plan, with the FHOG. I have a 10% deposit my own money + the grant, yet still many of the lenders, are making a fuss, saying that buying off the plan is difficult and they will only lend 80%.
Has anyone had any success with any lenders in this situation?
Cheers
Eyogina

 

[sash]

The reason they will lend you only 80% is because they have not idea what the property will be worth when it is complete.

In my opinion....new property usually has a price premium built into it. So expect very little price growth unless you have really done your homework.

Be also careful that you will not be able to settle if your income to service the loan drops or the valuation comes under the amount of the property.

Hi All
I am just after any advice/experience, for obtaining finance for buying off the plan, with the FHOG. I have a 10% deposit my own money + the grant, yet still many of the lenders, are making a fuss, saying that buying off the plan is difficult and they will only lend 80%.
Has anyone had any success with any lenders in this situation?
Cheers
Eyogina

 

[Dragon]

Hi All
I am just after any advice/experience, for obtaining finance for buying off the plan, with the FHOG. I have a 10% deposit my own money + the grant, yet still many of the lenders, are making a fuss, saying that buying off the plan is difficult and they will only lend 80%.
Has anyone had any success with any lenders in this situation?
Cheers
Eyogina

That's unusual.

We can provide a conditional approval, subject to completion of the property. Once the property is complete, we send a valuer to confirm the property value and issue the final approval.

 

[Spectre]

1) When is the completion date...
2) if inside 12 months get a preapproval for a 90% loan then submit the contract to purchase when its near finished/the developer gets you 30/14 days notice (so skip the off the plan bit)

End of the day its still going to be subject to final valuation as has been noted.

 

[Bradsdad]

When is construction supposed to start/finish?

 

[Rolf Latham]

Recently did a 95 % lend with CBA for an OTP, completing in 12 mths.

They had minor trouble with understanding bits and pieces, but it looks doable.

the core risk that I see..............a lot of ...............is that the finance approval ( and FHOG) may be long dead before you settle. Case by case, thats something that needs careful consideration.

ta
rolf

 

[Bradsdad]

CBA will only hold OTP approvals for >80% loans for 6 months (18 months + a further 6 maybe for no LMI deals). They then require resubmissions to ensure servicing and LVR.

 

[rugrat]

you can always do what we do, check your servicability before signing anything and then take the risk that you will get financing once settlement is due. Of course you have to weigh up your risks in doing this and have an exit strategy in place in case lending criteria change to much in the mean time. Provided servicability is alright, the biggest concern tends to be the valuation price of the new property - if it get valued at less then what you are paying you need to be able and willing to chip in more of your own cash into it.

 

[Bradsdad]

you can always do what we do, check your servicability before signing anything and then take the risk that you will get financing once settlement is due. Of course you have to weigh up your risks in doing this and have an exit strategy in place in case lending criteria change to much in the mean time. Provided servicability is alright, the biggest concern tends to be the valuation price of the new property - if it get valued at less then what you are paying you need to be able and willing to chip in more of your own cash into it.

Yep yep & yep.

Maybe a little tough for 1st timers though as access to other equity in property wouldn't be possible.

 

[boods99]

Another thing to think about is that the developer may only be able to accept unconditional contracts as they would be required to enable them to get construction finance, that usually means a non-refundable 10% deposit upon the signing of the contract.
The risk here is if you cannot complete the contract come settlement time, (vals come in lower than what whas expected, and you have no extra funds to tip into the deal) the developer can keep your deposit and sue you for the difference of the eventual sale price and what you paid.

boods

 

[tobe]

In almost all cases I would think the developers want 10% unconditional. Buying otp is risky, who knows what the properties will be worth when they settle?

The builder manages their risk by selling some or all of them early. However, Banks will not risk giving an unconditional approval to the purchaser without a valuation, which is only valid for 3 months.

All this combines to make otp very dificult for FHB's to get their head around. they can buy them, just like anyone else, its just they are taking a further risk, because if the val comes in low, or the lending polices or their circumstances change in that time, they do not have the buffer second home buyers/investors might have of further properties to fall back on.


The FHOG is available for otp, as long as the builder can complete within a certain timeframe, I think its 12 months in victoria, it may well be diferent in other states.

 

[Spectre]

More fun gets added with the builder goes into recievership.

 

[tobe]

or the whole market tanks like the docklands in Melbourne 5 years ago. A couple of people didnt want to complete their purchase, Builder keeps their 10% and the bank does a mortgagee auction or 2. Later valuations are affected by the sale price of the mortgagee auctions, and other purchases now have to tip in more money meaning more are forced into non completion, meaning more forced sales, and lower prices. Banks cotton on and reduce LVRs for certain postcodes and buildings, and it continues to cascade.

Why OTP are risky.

 

[Qlds007]

Exactly the same thing is happening now on the Gold Coast with the high rise units.

Some of the vals we are getting back are 50% of purchase price. Ohhhch