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Everything you need to know about buying off the plan and securing finance

Everything you need to know about buying off the plan and securing finance

Aug 1, 2023 | Investment Property, Purchase, Self Menage Super Fund (SMSF)

There are many different ways to purchase property – and one of those ways actually involves committing to purchasing a property that doesn’t yet exist.

Buying real estate ‘off the plan’ means committing to purchasing a property that is still in the pre-construction or early construction phase, often long before a building or development project is completed. Many home owners and investors see buying off the plan as a good way to purchase a brand new property, however, just as with any investment, there are pros and cons to consider – so let’s have a look at them.

The benefits of purchasing property off the plan

  • Lower Purchase Price
    One of the main attractions of buying off the plan is the potential to secure the property at a lower price than it would be once construction is finished. Developers often offer discounts and incentives to early buyers which can result in significant savings.
  • Potential Capital Appreciation
    In a rising property marketing, purchasing off the plan can be a smart investment strategy. As property values will likely increase during the construction period, buyers may benefit from capital appreciation ever before they’ve settled on the property.
  • Customisation Opportunities
    This benefit particularly applies to home owners, but also provides investors with opportunities to boost their potential rental income. Purchasing off the plan often gives you the chance to customise certain aspects of the property, including selecting finishes, materials or layout preferences to suit their specific needs and tastes.
  • Delayed Payment
    When purchasing off the plan, buyers typically pay a deposit upfront and the rest of the purchase price upon completion. This extended settlement period provides you with extra time to save or secure finance.
  • Stamp Duty Savings
    As Stamp Duty is only payable on the land for off the plan purchases, you could be savings thousands of dollars on your purchase.
  • Deposit Options
    Whilst most buyers pay cash to secure their deposit, purchasing off the plan provides you with other more flexible deposit options to consider, including Bank Guarantees and Deposit Bonds. It’s always best to check with your property consultant as to what method of payment the develop is happy to accept.
  • Tax Advantages
    Being a new property, investors can claim depreciation which is a major tax incentive. This helps to reduce the ongoing costs of holding the property, allowing you to build a larger portfolio.

The disadvantages of purchasing property off the plan

  • Uncertainty
    One of the things that potentially buyers are often afraid of is the uncertainty of buying off the plan. As the property is yet to be constructed, buyers have to rely on floor plans, artist impressions and development promises as they’re not yet able to see the final product.
  • Construction Delays and Risks
    Construction projects can face unexpected delays due to various factors, such as weather, planning permits, development applications or financial issues. These delays may result in buyers having to wait longer for the property’s construction, impacting their plans.
  • Market Fluctuations
    Whilst a rising property market can bring capital appreciation, a declining market can have the opposite effect. If property values drop during the construction period, buyers may find themselves with a property worth less than they originally paid.
  • Changes in Financial Circumstances
    A buyer’s financial situation may change between time of purchase and completion, as well as general economic circumstances. This can make it harder to secure financing or meet the financial requirements during settlement.

How can you mitigate risk and increase your chances of securing finance for your off the plan purchase?

As mentioned above, economic or personal circumstances may change between the time of purchase and completion, however, below is what we always recommend our clients do to ensure they can reduce risk and have the best chance of securing finance for their property:

  • Increase your savings
    This will help to cover any unlikely shortfalls
  • Do not apply for any lines of credit during this time
    Don’t be tempted by credit card offers and avoid signing up for any additional lines of credit whilst waiting for your property to be completed. This could impact your borrowing capacity or credit rating.
  • Ensure all commitments are paid on time and up to date
    No lender likes to see late or outstanding payments, so make sure you’re paying all commitments on time.
  • Don’t change employment
    Some lenders can have issues with short term employment so it’s important that you chat to us should your employment change.
  • Maintain or reduce your living expenses
    Increasing your lifestyle costs may reduce your borrowing capacity so it’s important to keep an eye on your budget.

What should you consider when purchasing off the plan?

We’ve talked about the pros and cons, but what things do you need to consider when purchasing off the plan?

  • Research the developer
    You want to make sure that you thoroughly research the developer’s reputation, track record and completed projects prior to committing to an off-the-plan purchase as this will give you an idea of their creditability and their quality of work.
  • Understand the Contract
    Ensure you carefully review the purchase contract with the help of a legal professional. Pay close attention to clauses regarding potential changes in the property’s design, timeline and provisions for compensation in case of construction delays.
  • Finances
    It’s important that you know what you assess your financial situation and consider the risks associated with the investment before committing. When working with Sanford Finance, we’ll sit down to work out your goals, discuss potential risks and action plans and discuss contingency plans in case of unforeseen circumstances to ensure you’re not jumping into anything you’re not prepared for.
  • Location and Market Analysis
    Think about the location of the development and its potential for future growth. Consider things like the demand for similar properties in the area and evaluate the long term investment potential for the property.

What finance options are available during the construction phase?

Purchasing a property off the plan can be quite stressful and challenge even the best laid plans, however, our construction loans take a lot of stress out of the equation.

A construction loan most commonly has a progressive drawdown where you receive instalments of the loan at various stages of construction, rather than receive it all at once at the start.

This means that you generally only pay interest on the amount that is drawn down, as opposed to the entire loan amount.

A number of lenders also offer construction loans that are interest-only during the construction period, later reverting to a standard principal and interest loan once the build is complete.

Construction Loan Case Study:

Craig and Belinda are purchasing land for $300,000 in Adelaide and building a new home for $400,000 for a total value of $700,000. They are borrowing 95% or $665,000. Assuming an interest rate of 5.95%, the repayments required by Craig and Belinda during the build phase will look like this:

Current Loan Current Loan Current Loan Min. Monthly Repayment Required
Land Loan Nil $265,000 $1,314 IO
Deposit 5% $20,000 $285,000 $1,413 IO
Base 15% $60,000 $345,000 $1,710 IO
Frame 20% $80,000 $425,000 $2,107 IO
Enclosed 25% $100,000 $525,000 $2,603 IO
Fixing 20% $80,000 $605,000 $2,999 IO
Practical Completion 15% $60,000 $665,000 $3,966 P&I
Totals $400,000 $665,000  
IO = Interest Only P&I = Principal and Interest

In the above table we can see that the repayments steadily increase over time and are interest-only during the build phase. Once the final payment is made, a construction loan will generally convert to Principal and Interest repayments.

How do you get started?

Buying off the plan can be exciting and nerve wracking all at the same time, but we’re here to help. We’ve helped many clients secure their dream property or investment property off the plan and know what you should be looking for, what lenders are looking for and are here to help you navigate the off-the-plan market more confidently.

Ready to get started? Contact us today!

Evaluating the property market in Australia: Is now the time to buy or sell?

Evaluating the property market in Australia: Is now the time to buy or sell?

Jun 1, 2023 | Property Market

The decision to buy or sell property is always a tricky one, as it’s a significant financial step that involves careful consideration of various factors – including market conditions.

Whilst it’s important to know that real estate markets can be unpredictable, understanding the key indicators can help you to make an informed decision. So, let’s look at the factors influencing the Australian property market.

  • Low Listing Numbers = Increased Competition for Buyers

With decade-low listing numbers, there’s not a lot of competition in the market for vendors – but competition is fierce for buyers as they battle it out to secure a property. This is one of the reasons that selling conditions have strengthened, as evidenced by above average clearance rates, faster selling time and less negotiation.

The total number of homes listed for sale across Australia is currently 28% below usual (as reported by CoreLogic). When these volumes are low, selling conditions strengthen, meaning that potential vendors thinking about selling may jump in now rather than waiting until the traditional spring period where activity surges and there’s a spike in competition.

  • Rising Prices

Home values for Sydney, Melbourne, Brisbane and Perth all recorded an increase in housing values from the lows recorded in February. A mid-month update based on CoreLogic Australia’s daily Home Value Index showed the upswing gathering momentum, especially in cities such as Brisbane where the index is up 1.0% over the past four weeks whilst the Sydney property market still remains the strongest.. Considering housing affordability measures remain stretched such a strong rate of growth is surprising, with many experts predicting that this price rise will not be sustainable in the long term.

  • Low Supply vs High Demand

As mentioned above, decade-low listing numbers and high demand has lead to fierce competition between buyers – as seen in auction clearance rates that have been holding at 70% or higher in recent weeks.

In a time where the market traditionally tends to cool off, the stats suggest that, if anything, the market is gathering momentum instead of slowing down. Strong clearance rates as well as faster selling times and reduced discounting rates indicate that it’s definitely a vendor’s market.

Recent data from the National Housing Finance and Investment Corporation shows a 115,000 dwelling undersupply for 2028.

  • Interest Rates Continue to Rise

The biggest challenge for potential and current property owners? Interest rates. With interest rates continuing to rise, demonstrating an ability to service a loan remains one of the biggest challenges for prospective buyers to face.

Interest rates are high, but assessment levels are three percentage points higher again – making it even harder for buyers to enter the market or secure their dream property.

  • Economic Uncertainty

In addition to rising interest rates, we’re also in the midst of a cost of living crisis where consumer confidence is low.

Should RBA cut interest rates, there’s a good change we would see a pick-up in both buyer and seller activity. It’s also highly likely that lower interest rates would be the catalyst for a further uptick in housing values, however, we’re not expecting a rate cut anytime soon and there’s speculation that rates may continue to rise this year.

Economists are split on their forecasts with predictions for further rate hikes, stability and some cuts later this year – all contributing to uncertainty and low consumer confidence levels.

  • A Helping Hand

Government policies and regulations play a crucial role in shaping the property market. Policies related to taxation, lending practices, and housing affordability can have both direct and indirect effects on the market.

At the moment, first home buyers in particular have a wide variety of grants, concessions and schemes available to them (outlined in our First Home Buyer Update here) that could make purchasing a property easier and more affordable.

  • Migration Predicted to Recover

With net overseas migration set to fully recover to pre-pandemic levels there will be more pressure on the housing market than we’ve seen in recent years.

With the return of international students and the surge in migration, it is estimated that an extra half a million people will be looking for somewhere to live in Australia in the next two years.

  • Low vacancy rates bringing investors into the market

We are experiencing a rental crisis across the country, with historically low vacancy rates encouraging more investors into the market. Unfortunately for investors, rising interest rates and property prices have made this challenging – as well as rising building costs making it harder for investors and developers to buy and renovate or rebuild.

Is now the right time to buy or sell?

In short? Maybe. Unfortunately it’s not a one size fits all answer.

Ultimately, making an informed choice that aligns with your own circumstances and long term goals is key when navigating the property market.

Luckily, we’re here to help. We’ll sit down to work out what your goals are, what your property budget may be and how we can help you secure a property. Contact us today to get started!

First Home Owner Update – What’s changing on July 1

First Home Owner Update – What’s changing on July 1

May 9, 2023 | First Home Buyers, Government Grants

First Home Owner Update – What’s Changing on July 1

From July 1, 2023, the New South Wales Australian Labor Party (ALP) will implement changes that will impact the way many first home owners purchase property. To make the transition easier, we’re going to run you through some of these changes and how they could impact you.

Stamp Duty Concessions

The ALP will introduce changes to stamp duty for first home buyers. Currently, first home buyers are exempt from paying stamp duty on properties valued up to $650,000, and receive a concession on properties valued between $650,000 and $800,000.

From July 1, 2023, these thresholds will be increased to $800,000 and $1 million respectively, providing even more support for those looking to purchase their first home.

Changes to the First Home Owner Grant

On July 1, the First Home Owner Grant will be increased from $10,000 to $25,000 for eligible first home buyers purchasing a newly constructed home or an off-the-plan property. This grant will be available for properties valued up to $1 million, and will provide a significant boost to those trying to get into the property market.

Removal of  the Home Buyers Buyer Choice Scheme

Under the newly elected Minns Labor Government, the NSW Government will now abolish the First Home Buyer Choice scheme, reverting to the new stamp duty concessions as mentioned above.

Over 4,200 First Home Buyers had selected the First Home Buyer Choice options since it was rolled out in November 2022.

For those First Home Buyers who had already selected the property tax option there will be a grace period and it would be unlikely that the new NSW government would reverse any existing arrangements. We will continue to monitor this and keep you updated.

First Home Guarantee Eligibility to Expand

Previously, the First Home Guarantee and Regional First Home Guarantee Schemes were restricted to married and single people, as well as those in defacto relationship who were also Australian citizens at the time of application.

From July 1 this year, the Home Guarantee Scheme will expand, allowing permanent residents to access the scheme as well as allowing friends, siblings and other family members to jointly apply for the guarantees. These schemes will also be available to non-first home buyers who have not owned a property in the past 10 years.

For both of these schemes, the federal government acts as a guarantor on up to 15% of the loan. This enables eligible buyers to purchase a home with as little as a 5 percent deposit, eliminating the need for lender’s mortgage insurance.

Family Home Guarantee Changes

The criteria for Family Home Guarantee applications will also be expanded beyond just single natural or adoptive parents with dependents. This means that the guarantee will be available to eligible borrowers who are single legal guardians of children, such as aunts, uncles and grandparents.

Under the Family Home Guarantee, the federal government acts as a guarantor on up to 18% of the loan. This enables eligible buyers to purchase a home with as little as a 2 percent deposit, eliminating the need for lender’s mortgage insurance.

The availability of this guarantee will also expand to include permanent residents in addition to Australian citizens.

How do I know if I’m eligible?

Our team will help you identify which Guarantees could be applicable to you under the Home Guarantee Scheme (HGS)

We’ll help you find the right path to owning your own home and will be with you every step of the way. To get started, simply get in touch to organise a call or meeting.

What is a Bridging Loan and When Should You Use It?

What is a Bridging Loan and When Should You Use It?

Mar 9, 2023 | Bridging Loan, Purchase, Uncategorized

Finding your dream home when you haven’t yet sold your previous home can be stressful – but that’s where bridging finance can help.

What is a Bridging Loan?

A bridging loan (or bridging finance) is short-term loan, generally lasting for up to 12 months or until the sale of your old property.

The idea is that the loan creates a financial “bridge”, allowing homeowners to purchase a property before selling their previous one – but there are many aspects to this style of loan that should be considered before signing.

How does a bridging loan work?

Here is a quick example to show you how the process may work

What is bridging finance and how does it work?


What are the benefits of a bridging loan?

  • Fast Approval
    Bridging loans are typically approved quickly, often within a few days, allowing you to secure your dream home faster.
  • Convenient
    A bridging loan allows you to look for and purchase a property without having to wait for your current home to sell. This means you could purchase the dream home you find unexpectedly – or secure a place to live without having to worry about renting between selling and purchasing etc.
  • Flexible Repayments
     The structure of your loan can vary, however, bridging loans typically offer flexible repayment terms, including interest-only repayments, lump sum repayments or the option to repay the loan once your old property has sold.
  • No Need for Temporary Accommodation
    If the timing is right with your bridging loan and your sale/purchase, it’s possible to avoid the cost and hassle of having to rent a home, living with friends or relatives or negotiating a longer (or shorter) settlement period to ensure you have somewhere to live.
  • Avoid Property Chains
    Bridging loans can help you avoid property chains, which can be complex and time-consuming, allowing you to move into your new home faster.
  • Flexibility
    Bridging loans provide flexibility and can be tailored to your unique financial situation, giving you peace of mind knowing that you have the financial support you need to purchase your dream home.


What are the downsides of a bridging loan?

  • Time limits12 months can go by very quickly and a time limit may mean you have to sell your old property at a lower than expected price just to get the sale finalised. If you don’t sell your home in the required time, you could be left with a large interest bill or risk the bank stepping in to sell your property.
  • The selling price risk
    Speaking of lower selling prices, if your property sells for less than expected you may be left with a larger ongoing loan amount – increasing repayments, interest etc and potentially causing financial difficulty.
  • Additional Costs
    Bridging finance may require two property valuations (your existing and new property) which could mean two valuation fees, as well as other fees and charges that come with the loan.
  • Termination Fees
    If your current lender doesn’t offer a bridging loan, you’ll need to switch to a lender who does offer these loans – potentially resulting in early exit fees from your current loan.
  • Interest and Interest Rates
    Interest is usually charged on a monthly basis, so the longer it takes to sell your property, the more interest your new loan will accrue. If you don’t sell your home within the bridging period, you will also typically be charged a higher rate.

How do I know if a bridging loan is right for me?

As everyone’s financial situation is different, it’s important to speak to a professional and do your own research before deciding if a bridging loan is right for you. At Sanford Finance, we’ll work with you to determine the right options for your unique financial situation – finding the right loan options, ensuring you are looking for properties you can afford and walking you from the first steps through to settlement and even refinancing in the future to ensure you always have the right loan for your needs.

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How your daily spending is impacting your borrowing power

How your daily spending is impacting your borrowing power

Oct 4, 2022 | Borrowing Power

Your morning coffee, a quick lunch with your colleagues, ingredients for dinner, your Netflix subscription… ordinary day-to-day expenses, but did you know that these can considerably reduce the amount you are eligible to borrow, even if you are a high income earner?

If you’re planning to buy a home, now might be the time to Spring clean your expenses and set yourself a weekly budget and here’s why:

Why do lenders care about living expenses?

Mortgage brokers and lenders are required to meet ‘responsible lending’ guidelines under the National Consumer Credit Protection Act (NCCP). These guidelines are designed to ensure that a borrower can afford to make the repayments on their loan without suffering ‘substantial hardship’.

This means, by law, all mortgage brokers and lenders must ensure that you have plenty of money left over from your income to repay your loan after you have covered your regular financial commitments.

What are living expenses?

A living expense is defined as anything that you spend your money on. Your morning coffee, Netflix subscription, monthly dinner out with friends and gym membership all count – even if you don’t see them as essential or could easily live without them.

When applying for a loan, we have to perform a thorough living expense and income assessment which determines your true financial position – and all of these expenses are included.

According to a 2018 survey by UBank, 86% of Australians don’t know how much money they spend every month on their living expenses – and those small expenses can quickly add up.

Without tracking your purchases, it’s easy to spend more than you earn without even realising – especially if you use a credit card.

But what if I plan to change my spending habits?

You might think “once I buy a property I’ll….”, but to most lenders, all that matters is how you’re spending money now.

Tips for controlling your living expenses

In order to control your living expenses, you first need to know where your money is going.

ASIC have a free MoneySmart Budget Planner that is a great place to start and it can be downloaded here. Another great tool from ASIC is the MoneySmart TrackMySpend app which helps you to record your weekly household budget, nominate spending limits, separate ‘needs’ from ‘wants’ and kickstart your savings goals.

How do we perform a living expenses assessment?

As mentioned, as part of the borrowing process, we need to conduct a thorough living expenses assessment. To do this, we’ll provide you with a Needs Analysis Questionnaire to help you work out your living expenses.

These expenses are divided into simple categories, including:

  • Childcare
    Including formal day care, nannies and occasional babysitters or childminding services.
  • Personal Care
    Clothing, footwear, cosmetics, personal hygiene products, hairdressing, manicures, massages etc.
  • Education
    All educational costs/fees for the borrower and any dependents, including books, uniforms, equipment and excursions.
  • Groceries
    This includes meat, fruit, vegetables and anything you might buy from a supermarket, including cleaning products.
  • Insurance
    This includes health, home, car, life, pet and all other insurances you may have.
  • Medical
    Doctors visits, dental care, pharmaceutical prescriptions, optical etc.
  • Utilities and Home Expenses
    Gas, water, electricity, rates, taxes, levies and any other costs for running your own home.
  • Entertainment
    Movie tickets, take away food, club memberships, gifts, holidays, hobbies and all recreational expenses.
  • Connections
    Includes expenses such as mobile phone plans, internet, home phones, magazine subscriptions, streaming services etc.
  • Transport
    Including personal vehicle expenses like petrol, tolls, insurance and car registration as well as public transport, car parking, car servicing and maintenance.
  • Rent
    This is for rent on a property that you live, board (if you are living with your parents or renting a room) or similar housing costs.
    Note: If you are buying a home you intend to occupy, rental expenses are not included as part of your living expenses assessment.
  • Investment Property Expenses
    Including any costs you are responsible for paying, such as council rates, insurance, property management fees, taxes and levies, body corporate and strata fees, maintenance etc.
  • Other
    All other expenses that do not fit into the above categories.

When should I cut back on expenses?

If you’re planning on purchasing a property, the best time to start is now. Regardless of whether you’re purchasing a home for yourself or an investment, it’s important to know how much you’re spending and where.

Remember that a lender will only give you a loan for an amount you can afford to repay, so cutting back on your everyday spending could give you increased borrowing power and will maximise the chances of your loan getting approved the first time.

Where do I start?

We are happy to run through your living expenses and help you find ways to budget and increase your borrowing power. Just contact our team via the website here, or give us a call on (02) 9095 6888.