Uncertainty of bank loan approval after 2.5yrs

Hi all,
We are looking forward to purchase a townhouse as PPOR. It’s massive project of 122 houses. The development will complete in 2.5-3 yrs. The developer need 10% deposit to book the home and remaining once construction is completed.
My dilemma is we don’t know what will be the banking rules and regulation after 2.5-3yrs down the track and if we will clear all obstacles to meet the borrowing capacity. What valuation will come to?
Currently we have borrowing capacity with 80% LVR. Honestly we are stretching ourselves to get to that 80% LVR.
Anyone has been in such situation? Any advice?

Thanks.

 

You've just perfectly listed most of the issues to do with buying OTP...well done!

If you're already at 80% LVR then it means you've got enough of a buffer to go 90% if the worst happens.

 

Don’t the prices of OTP property already inflated when they sell?

 

Youre pretty much in the same boat as anyone who has bought OTP and unregistered land.

It's the risk you take for buying something at today's price ( with a little inflation) with the benefit of capital growth for the next 3 years with only paying 10% deposit.

 

Everyone buying off the plan - except those with cash to settle experiences this.

You are making a gamble betting on getting a loan, and you will also be preventing yourself from buying more property during this time, or maybe changing jobs, because you will be worried about finance.

 

With all the risks youve pointed out, why are you buying these then?

 

Seems like at least he's going in with his eyes wide open. Don't often see new investors figure out the problem with OTP's by themselves!

 

Eyes wide open means you can avoid the hole, not defy gravity?

 

Well..because it's worth the risk!

 

What is the compensation for taking this risk? Ability to live in a brand new place? It’s going to grow more than an existing property? You just want to live there?

 

@Trainee
The location is good and yeah, living in a brand new place. It also fits in to our overall financial planning and we see we could achieve it. Addtionally, having entered in early to buy OTP townhouse I am getting a decent price. The same house will be priced by roughly 40K more in stage 3 of development. At least I know now that when the bank valuation occur my property will stand to the price quoted. Plus I am aleady gaining 40k to start with(?)

 

You've outlined the potential risks with buying off the plan. Here's what you can do about it:

1. Don't buy this. Purchase something more immeidate. This avoids these risks entirely.

2. Understand your financial profile in relation to this purchase now. Figure out how much affordability margin there is. Understand what you need to do to improve these margins and what not to do, then spend the next 2.5 years towards making it work, factoring it into every financial decision you make. Also accept that if you can't make it work, you'll loose the 10% deposit, possibly more and there are some things that could be completely out of your control.

Most OTP purchases end up working. In a few cases it's good planning, sometimes it's just luck, usually most people are blissfully ignorant. It's also the main type of property deal that I get the most distressed calls where someone wants me to perform a miracle before they loose their deposit.

There's really only one way to guarantee that an OTP purchase will work. This solution is to eliminate the bank and pay cash.