Alternative ways to buy your first home: Part 3
Last week we looked at the 2nd of our top 5 strategies for thinking ‘outside the square’ in order to realise your Great Australian Dream of home ownership. In this blog (part 3 of 5) we look at the 3rd of our top options of alternative ways to buy your first home.
If you missed part 1 or 2 of the series, please select below:
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Strategy 3: Buy now, Pay later
Let me start off by stating this: At FHBA we stress that this method comes with some risks, as it involves ‘Buying off-the-plan’. Property developers who construct apartments/units, townhouses and freestanding homes often put their properties on for sale before they are finished, sometimes even before they begin constructing the project. This type of sale is known as ‘Off-The-Plan’, whereby buyers can purchase their brand new home in advance.
The good news is that the risks associated with off the plan purchases can be mitigated if you perform the necessary checks prior to committing to an off-the-plan purchase. Buying off-the-plan allows you to purchase a property now with a minimal deposit (usually 5 or 10%) and it then gives you time (between 6 & 18 months in most cases) to save, which can prove to be a motivating factor for you to save harder & smarter. This buying option also allows eligible first home buyers to take advantage of your State’s Government Grants & Incentives.
- First home buyers are only eligible for the First Home Owners Grant if they purchase a new property, either off-the-plan or a property not occupied before. Some states also provide stamp duty concessions/exemptions for those purchasing a new home
- An off-the-plan purchase can trigger a change in your saving and spending patterns, as you know you will have to save a certain amount by a particular date in the future (i.e. settlement). An off-the-plan purchase also allows you to only make a low initial payment to secure the new home
- It gives you that brand new feeling, provides modern living and more importantly comes with a structural warranty. Unlike established homes where the buyers are responsible for checking to make sure the property is structurally sound, most off-the-plan properties are required by law to include a 7 year structural warranty.
- Uncertainty in a developer’s ability to finish the project and sunset clauses is something all first home buyers should consider. Aeveloper’s financial viability and track record of completion times should be checked
- As most home loan pre-approvals are only valid for a period of 3 months this can be an issue for first home buyers. As market conditions and bank lending criterion are always changing, the banks may not be willing to lend the same amount of LVR (Loan-To-Value-Ratio) if the valuations have changed since you exchanged the contract. A 20% deposit at settlement can help mitigate this
- When purchasing a new car you usually pay a significant premium compared to a car that has been driven out of the dealership. The same applies to homes, buyers may pay a premium for a new property to get all the new lifestyle features that an established home can’t offer
How can FHBA help with this strategy?
- If you are interested in exploring a brand new property purchase further and see if this can help you get into the market sooner, our FHBA Brokers can help you. FHBA Mortgages, powered by Mortgage Australia, have many years of experience with helping first home buyers with construction loans and off-the-plan purchase. An FHBA Broker will help by guiding you through the home loan and suggesting how much you should save for and spend on a off-the-plan purchase.
- We will complete fact find to discover what your circumstances are, as well as your goals & objectives such as where you want to live
- We will organise a complimentary & obligation free consultation with an FHBA New Homes new property expert – who will be able to present you with a range of new property
Get a complimentary, no obligation home loan quote today and find out how we can help you!