Buying Off-Plan

Buying a new build home off-plan can have some major benefits - but also some potential risks.

The basic idea of buying a property off-plan is that you purchase it at a price which is agreed based on current market rates rather than the rates that will be available when the build is complete. The benefit of buying off-plan is that the buyer can usually see huge financial profits – sometimes as much as 20% as the value of the property increases in the time it is taken to build.

Why buy off-plan?

As house prices in the UK continue to rise, prospective buyers are happy to put down deposits on homes which are yet to be built to ensure that they secure lower prices and see a more rapid return on investment. 

How Does it Work? 

Buying off-plan works in very much the same way as buying a property that is already built. In order to purchase a property off plan you will need to provide your housing developer with evidence that you can afford to buy the property – be that through funds for an outright purchase or with a mortgage. In order to apply for an off-plan mortgage you must be able to demonstrate to the lender that the property is worth what you have agreed to pay for it.  Most lenders would value the property based on development specification and plans; then again on completion to ensure it is worth what the developer assured it would. 
You are usually required to pay a deposit of 10-30% depending on which developer you buy with and sign a legally binding contract.  Once this contract is signed you will be liable for the remaining balance of the property cost- no matter what happens during the built. 

What are the Benefits? 
  • The obvious benefits to buying off-plan centralise on the financial gain that could be had if the market changes and the value of your home increases. For example, a couple could purchase a property for £245,000 based on the market value at the time of purchase. However, by the time the house is complete the market could have changed as the house is now valued at £260,000 - meaning they have already made £15,000 without doing anything.
  • Depending on your developer and at what stage you purchase your off-plan property you can have some creative input on things like internal layout, kitchen styles, flooring and room finishes. 
  • Delayed payment of the property means you will have time to save / get finances in order for your mortgage in the time it takes to build your property. 

Publish date: 22/02/2016