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ISCOVER
Staff Reporter
1300HomeLoan managing director John Kolenda has warned first home buyers to conduct their due diligence before buying a property “off the plan”.
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“The key difference with buying off the plan or building compared to buying an established home is that you are committing to a purchase that could be as much as 15 months away,” Mr Kolenda said.
“This allows you to save more deposit which is great but it also exposes you to risks like falls in the market or losing your job in the meantime and then you have trouble getting a loan approved.”
Mr Kolenda said it was important for buyers to understand that their pre-approval from their lender was not a guarantee of a loan amount later on.
“If the market values drop before settlement date you are likely to see the value of your purchase fall as well and that will cut the amount you can borrow,” Mr Kolenda said.
“Buyers need to have a fall back plan about how they will come up with a short fall of deposit if required.”
“If the apartment or home goes up in value you will be in luck with a capital gain but the lender is still likely to value it at your purchase price so will need the full deposit anyway,” Mr Kolenda said.
Mr Kolenda said that there were special issues to be considered with apartments such as the quarterly strata fees and the body corporate structure.
“Make sure you can afford to cover these fees and, of course, make sure you do a final inspection and to make sure any defects were fixed before settling as the developer is obliged to repair any defects,” Mr Kolenda said.
