5 benefits buying off the plan for first home owners

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Let’s be real: homeownership can be a pocket-draining venture. Any decision you cast towards your future home can set you back thousands of dollars — with each seemingly minor decision weighing your savings down and burning a deep hole in your pockets.

If building a home isn’t a short-term priority, or if you’re still at the initial stages of your career, you can consider buying off the plan. The off-the-plan scheme pertains to purchasing a house or piece of property in its pre-development stage; meaning, it hasn’t been physically built yet. 

Developers are incentivised to promote this scheme as it gives them financial backing and more favourable lending terms. Prospecting homeowners also get rewarded by having the ability to secure a home at a potentially lower market rate.

While going this route may seem risky and time-consuming, there are numerous benefits the average homeowner can achieve from buying off the plan.  Let’s look into five ways this scheme can assist you and the average homeowner in securing the property of their dreams.

What Does Buying “Off The Plan” Really Mean?

Buying off the plan means buying a house or real estate that’s not yet in move-in condition. It’s a cheap way to secure a newly-constructed house for the next few years. It could still be under construction, or it could merely consist of a drawing, a showroom, or initial floor plans.

You’ll have to sign a contract to indicate your commitment to buy the off-the-plan scheme. The developer will also sign it and is legally obliged to uphold their side of the bargain. Each contract has a different set of terms. 

But in general, these written agreements state that you pay an initial downpayment of about 20% of the home’s value and the remaining balance upon the property’s completion.

How to Fund an Off The Plan Property?

While paying an initial downpayment of 20% of the house is much more achievable than paying in full, this figure can still amount to anywhere between $200,000 to $250,000 if you’ve picked a house in the suburbs of Sydney, based on the median house prices.

As such, it’s important to be on top of your finances and make the most out of government grants so that you can still afford to live comfortably as you pay off your home loan.

Here are some ways you can fund your off-the-plan home:

  • Savings account: Dedicate a fraction of the amount of money you accumulate through your income streams to the off-the-plan property.
  • Home loan: Browse local and online quotes and repayment terms and find the most favourable one for your situation. Follow this link to learn more.
  • Government grants: Many government grants like the First Home Owner Grant (FHOG) scheme can provide up to $10,000 to first-time homeowners buying, building, or buying a house off the plan.
  • Bank loans: If your credit score is good and you’re confident you can pay back the terms, you can apply for a loan in the bank to help you pay off the initial downpayment.
  • Friends and family: As a last resort assistance scheme, you may call upon the people close to you for financial assistance.
  • Other assets: You can leverage your personal assets to get equity to fund your new purchase.

Besides the aforementioned suggestions, you may also negotiate with the developer themselves to try to sweeten the deal for you.

5 Benefits of Buying Off The Plan for First Home Owners

First home owners can benefit greatly from buying off the plan for several reasons. Here are some of the benefits of buying a home through this method.

  1. You Get A Better Price

There’s obviously some inherent risk to buying a house that hasn’t been completed yet. The developer could delay the project, they could suffer from bankruptcy and put the project on indefinite hold, or the finished home could be affected by outside forces that tarnish its quality.

There’s a mutual understanding of this risk between homeowners and developers. This is further compounded by the fact that the house isn’t in a state for anyone to move into yet. That is why developers price their off-the-plan houses at a much lower market rate than fully-established houses.

Furthermore, there are government incentives that can reduce the price of land property tax. One such case is the reduction of land transfer duty in these houses compared to built houses, saving you potentially thousands of dollars.

  1. You Get The First Pick

As there’s no physical property yet, depending on your contract, you get the freedom to choose the first among the many available properties the developer is selling.

This is especially a plus if your selection is for a row of apartments and townhouses. 

Some apartments, for instance, may have parking lots whereas others do not, so securing an apartment before anyone else can give you additional perks that you wouldn’t otherwise get if you buy property the traditional way.

  1. You Can Influence Design

Some developers are more receptive to buyer requests than others. While not all of them offer complete flexibility, many are open to accommodating certain design preferences and modifications. So don’t be afraid to ask!

They could give leeways when it comes to the construction of the house, granting you the ability to influence how you’d like your future house to be built.

That said, some additional modifications will have a price tag associated with them, so don’t forget to request the updated quote before signing into any contacts.

  1. House Value Can Increase

Unless stated otherwise, the price is typically locked as soon as the contract is settled. This means the house price is fixed as it’s independent of the appreciation or depreciation of the local housing market over time.

If you’ve chosen a house in a good location, the value of the house you bought off the plan can exceed the purchase price tremendously as years pass. This is especially true if the house is located in a city where multiple industries are booming.

That said, not all houses are expected to appreciate, so do some comprehensive research before going all-in. If you’re lucky to have found a good off-the-plan house, you could be sitting on an asset with a value that can grow by six digits in value in just a few short years.

  1. It’s Good As New

Buying an off-the-plan house is akin to buying a brand-new house. All the facilities are untouched, for one. Everything’s modern and in a fresh state too.

Unlike buying a used property, there are no repairs or touch-ups needed to get the house looking the way you want it to. Furthermore, you’ll be spending a lot less on maintenance costs in the initial years due to the newness of the house.

If you want to build a house but don’t have the necessary funds at present, buying off the plan is a solid choice for first-time homeowners. Not only will it make you happy, but it will also make your wallet happy.

Happy house hunting!

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