Buying off plan or thinking about bridging finance? Be careful.

The Reserve Bank is keen to avoid a property crash which could have serious consequences throughout the economy.  To turn down the heat on prices it has tightened controls on lending.

There are two knock on effects that could come back to bite buyers in the next few months.

The first affects those purchasing apartments off plan with a settlement date a year or two down the track. The risk is that the bank may pre approve finance now but shake its head when you come back for the rest of the money.  Any letter of offer that still has conditions to be met is a cause for concern and the end result could be a lot of extra stress and expense at settlement time.

The second risk occurs when you borrow money to buy a new house before selling your old one.  Many people call this bridging finance but it is actually a speculative home loan.  They’re hoping the stars all align but what if they don’t?

Bridging finance is only where you have sold your home unconditionally and the settlement date of the new purchase is prior to your current home settling.

If the previous mantra was “buy before you sell”, the current one should be “sell before you buy”.  Then you won’t be at risk of carrying a large loan while desperately trying to flog your existing property in an uncertain market.

There’s no need to panic as both these risks can be mitigated with smart planning.  But make sure you talk to us before purchasing off plan or committing to buy an expensive new home before you’ve sold your current one.

Thinking about buying in the next few months?  Make an appointment