Purchasing apartment - Finance approval

[Jk200sx]

In a situation where one wishes to purchase an apartment hypothetically off the plan, and it has/is due to be completed/settled in approximately 18 months, can a subject to finance clause be included (considering finance approvals last 6 month)?

Or, do you just do your due diligence up front and know that you are covered?

 

[superAndrew]

Lender's won't give you a proper finance approval for off the plan properties.

The main risk you and the banks are facing is that the valuation at completion will be lower than the purchase price you paid the deposit for.

Can you included clauses in the contract to protect yourself?
Yes of course you can.

Will the developer accept those clauses?
That depends how hot the market is. If it is hot and there are plenty of buyers then they might not accept it.

You could also include a clause that allows you to terminate the contract if the value of the property at completion is 95% (for example) lower than the purchase price you paid the deposit for.

Cheers
Andrew

 

[Shahin_Afarin]

No but the closest thing you can get is a pre approval based on your current circumstances (e.g change of employment at the time of formal approval may change things depending on the LVR, application, etc) and the only condition can be the satisfactory valuation of the property.

Best to start planning as soon as possible even if completion is several months away.

 

[Peter_Tersteeg]

About the best you're going to get is an approval that lasts 6 months, perhaps a little longer under the right circumstances.

Getting a pre-approval or at least a minimum preliminary professional opinion prior to signing is well worthwhile. Just be aware that you'll likely have to reapply shortly before the settlement.

There is always a finance risk with buying off the plan, but it can be mitigated reasonably well.

 

[Jamie M]

There's no point applying for anything if settlement isn't for 18 months - no bank will provide a preapproval for this length of time.

However, it would be very prudent to speak with a finance person now about your situation to ensure everything else stacks up (but keep in mind that your situation could possibly change in 18 months from now).

Cheers

Jamie

 

[Jk200sx]

Thanks for the replies.

 

[Marty McDonald]

Developers generally won't accept any subject to clauses because most need the pre sales to satisfy their lenders / their loan requirements.