Mortgage Broker Homebush
Homebush and Homebush West sit next to Sydney Olympic Park, and a lot of the apartment stock is recent or still being built. Buying new, and especially buying off the plan, changes the finance almost completely: you can exchange today and not need the loan for two years, and a lot can happen in between.
Helping buyers, owners and investors in Homebush
Links Property Finance is a Sydney mortgage broker. We don't have a Homebush office, and we're not going to claim one. We do run the finance for people buying across the Inner West, and Homebush brings a particular set of problems worth getting right.
Newer apartment stock is generally straightforward to finance when it's finished and you're buying it from an owner. Buying it from a developer before it exists is a different exercise, with risks that sit outside your control and a timeline measured in years rather than weeks.
The gap between exchange and settlement
With an established purchase, exchange and settlement are usually about six weeks apart. Off the plan, that gap can be one to three years. Your income might change. Rates might change. Lender policy will almost certainly change. And the valuation that matters is the one done near completion, not the price you agreed at the start.
None of that makes off the plan a bad decision. It does mean the buffer you build in at the start is doing more work than you'd expect.
Buying off the plan: the four things that decide it
1. Valuation at completion
Your lender values the finished apartment shortly before settlement. If it values below the price you agreed years earlier, the lender lends against the lower figure and you fund the shortfall in cash. This is the single most common off-the-plan finance problem, and it is the reason a deposit that looked comfortable at exchange can turn out not to be.
2. Finance approval expires
Pre-approval typically lasts around three months. It cannot cover a two-year build. You will need a fresh application close to completion, assessed against your circumstances and lender policy at that time, not at exchange. Anything that changes in between, a new job, a car loan, a baby, parental leave, is assessed then.
3. Sunset clauses
Off-the-plan contracts contain a sunset date by which the development must be completed, after which either party may be able to rescind. NSW law now restricts a developer's ability to use a sunset clause to cancel your contract, generally requiring your consent or a Supreme Court order. Your conveyancer should walk you through the specific clause before you sign, because the terms vary.
4. Lender appetite for the building
Lenders maintain views on individual developments and on how much they will lend in one complex. Some apply postcode-level limits in areas they consider high-density. A building that several lenders are cautious about is worth knowing about before you commit, not after.
First home buyers around Homebush
New apartments and the government schemes interact in ways worth planning around.
Sydney price cap of $1.5 million, no income caps, unlimited places. Your place needs to be secured with a participating lender, and timing matters on a long build.
No transfer duty up to $800,000 for eligible first home buyers, concession to $1 million. Check your figure.
A $10,000 grant may be available on eligible new homes in NSW, subject to value caps and criteria. Confirm current eligibility with Revenue NSW.
Off the plan usually requires 10 per cent at exchange, sometimes via a deposit bond. The balance is due at completion.
Assume the valuation could come in under contract price and know where the difference would come from.
Between exchange and completion, avoid new debts and job changes if you can. It is all reassessed at the end.
Investment lending around Homebush
Proximity to Sydney Olympic Park and the rail line makes the area a common choice for investors. Lenders assess investment loans on different terms to owner-occupier loans: rental income is usually only partly counted, commonly around 80 per cent, to allow for vacancy and running costs, and investment interest rates generally sit above owner-occupier rates.
New apartments generally offer more depreciation than older stock, which affects after-tax returns. That is a question for your accountant, and this page isn't tax advice. On the lending side, the questions are serviceability, loan structure and whether interest-only genuinely suits your plan or just defers the problem. How investment loans are assessed.
Refinancing a newer apartment
If you bought off the plan and settled at a high loan-to-value ratio, refinancing usually becomes worthwhile once the ratio falls below 80 per cent, either through repayments or through a valuation that has moved in your favour. Below that line, pricing generally improves and lenders mortgage insurance stops applying to further borrowing.
One caution specific to newer buildings: if the complex has known defect issues, a refinance valuation can come back lower than you expect, which changes the maths. Worth checking before you start. Book a loan health check.
Useful tools
Borrowing power
What a lender might let you borrow, from your income.
OpenCan I afford this property?
Contract price in, full cash requirement out.
OpenLVR and insurance cost
Useful for modelling a valuation shortfall at completion.
OpenDeposit strategy
Five, ten or twenty per cent, and what each changes.
OpenNSW stamp duty
First home buyer exemption and concession, at any price.
OpenRepayments
Monthly principal and interest at any size, rate and term.
OpenWhy people work with Links
Get your free First Home Buyer Report
Your deposit position, the real cost of buying, the government pathways that may fit and what to do next. Particularly worth doing before you sign an off-the-plan contract.
Common questions about buying in Homebush
Can I get a home loan approved now for an off-the-plan apartment settling in two years?
Not in any binding sense. Pre-approvals generally last around three months, so a formal application is made close to completion and assessed against your circumstances and lender policy at that time. What you can do now is model it properly, understand what the lender will be looking at, and build in a buffer so a change in rates, income or valuation does not leave you short.
What happens if the apartment values below what I agreed to pay?
The lender calculates your loan against the lower of the contract price and its valuation, so the difference has to come from you in cash on top of your planned deposit. You are still contractually bound to complete. This is the main reason to build a buffer into an off-the-plan purchase and to think carefully about how much of your savings the deposit consumes.
What is a sunset clause?
It is the date in an off-the-plan contract by which the development must reach completion, after which the contract may be able to be rescinded. NSW law restricts a developer's ability to use a sunset clause to cancel your contract, generally requiring the purchaser's consent or an order of the Supreme Court. The specific wording varies between contracts, so have your conveyancer explain the clause in yours before you sign.
Do I need the full deposit at exchange?
Off-the-plan contracts commonly require 10 per cent at exchange, with the balance due at completion. Some developers accept a deposit bond, which is a guarantee rather than cash and can preserve your savings during the build. Whether a bond is available and what it costs depends on the developer and the provider, and it does not reduce what you ultimately have to pay.
Are new apartments harder to finance than established ones?
Not inherently, but some lenders apply limits on how much they will lend within a single complex, and some apply tighter requirements in postcodes they treat as high-density. A finished apartment bought from an owner is usually straightforward. The complications generally attach to buying from a developer before completion rather than to the apartment being new.
Can I use the 5% Deposit Scheme on an off-the-plan purchase?
Off-the-plan purchases can be eligible under the Australian Government 5% Deposit Scheme, but timing is the practical constraint: a scheme place is secured through a participating lender and has to line up with your settlement. Eligibility criteria and time limits apply and should be confirmed with the lender and against the current scheme rules before you exchange.
Should I buy off the plan or wait for a completed apartment?
That depends on your tolerance for the risks above and what you are getting in return, usually a longer time to save and a property nobody has lived in. From a purely financing standpoint a completed apartment is simpler, because the valuation, the loan and the settlement all happen in the same six weeks. Neither answer is automatically right; the point is to choose knowingly.
Before you sign anything off the plan.
Start with your buying position, then talk it through. The contract you sign today is assessed against lender policy two years from now.