How to Get a Home Loan for Off-the-Plan Property in South Australia

From pre-approval to settlement, the finance process for buying off-the-plan property works differently to buying an established home. Here’s how the money side works - step by step - so you know exactly what to expect and when.

When you’re buying a home for the first time, one of the biggest unknowns isn’t the property itself - it’s the finance.

How to get a home loan, when to apply for one, what happens between signing and settling and where your money needs to go at each stage.

And for off-the-plan buyers, these questions are even more relevant.

That’s because there’s often quite a long gap between committing to a property and completing the purchase, so the lending process follows a different timeline than it does for an established home.

Pre-approvals can expire before the build is finished, formal approval doesn’t happen until the property is near completion and valuation can only take place once the home is finally built.

But there’s no need to worry. Once you understand how the process works, everything feels far less daunting.

So let’s walk through each financial stage of buying off-the-plan in SA, from getting your finances in order through to where every last dollar ends up on settlement day.

Getting clear on your finances before you start looking

Before you visit a display suite or research a particular property development, it helps to understand your financial position clearly.

This helps you to build a clear picture of what you can afford and what lenders will expect from you.

Put simply, banks and lenders look at things like your income, existing debts, living expenses, savings history and credit profile to work out how much they’re willing to lend you.

They’ll also apply what they call ‘serviceability buffers’, which test whether you could manage repayments if interest rates were to rise.

If that all sounds a little full on, engaging a mortgage broker can be a good starting point.

A good broker can take a lot off your plate by comparing lenders for you, saving a whole lot of time. They may also be able to find loan offers you would not come across if you went direct to a bank.

For off-the-plan buyers, it helps to work with a broker who understands the longer lead times involved. They can help structure your loan around a process that doesn’t follow the usual timeline.

It’s also worth checking your credit report early. Errors or outdated listings can slow things down later, and they’re much easier to sort out before you’re under contract.

You can request a free report through agencies such as Equifax or Experian.

And while the extended timeline can feel frustrating at times, it does come with one clear upside - you have more time to strengthen your financial position before settlement, whether that means growing your savings, paying down debt or strengthening your borrowing capacity.

Buyers of established homes usually do not get that same buffer.

What pre-approval means - and what it doesn't

Once you’ve got a good grip on where your finances are sitting, the next step to obtaining a home loan is to seek what’s known as ‘pre-approval’.

Also sometimes referred to as ‘conditional approval’, this is where a bank or lender reviews your financial position and gives you an early indication of how much they may be willing to lend, subject to certain conditions.

Pre-approval gives you a clear budget to work with before you commit to an off-the-plan contract, and shows a developer that you’re in a good position to move ahead with the purchase.

But it’s important to understand that it is not a guarantee, and does not mean the loan is locked in.

Unlike purchasing an established home, where the gap between signing a contract and settlement is typically quite short, with off-the-plan properties there can be quite a long stretch between these two points.

Since most pre-approvals only last three to six months, there’s a fair chance yours will expire before the build is finished.

If this happens, the lender will usually review your finances again when your new home is close to completion and organise a valuation of the finished property before giving formal approval. More on that shortly.

And if you’re planning to make the most of government support initiatives, such as the First Home Guarantee or the First Home Super Saver Scheme? This is also a good time to confirm your eligibility and make sure the timing works with your purchase.

The other costs you need to plan for

The purchase price is only part of what you need to plan for.

To budget properly, you also need to account for all the extra costs that come with buying and owning property.

Knowing what these are from the outset is all part and parcel of being a responsible buyer.

The first is your deposit, which is usually 10% of the purchase price, but this may vary based on the product and contract. For off-the-plan properties, that money is usually paid when you sign the contract and held in trust until settlement.

Stamp duty is another big one.

Depending on the property and your eligibility, some first home buyers in South Australia may be able to avoid it on new or off-the-plan purchases thanks to the SA government’s Stamp Duty Relief scheme. That can be a major saving, so is worth checking out.

If you are buying with less than a 20% deposit, you may also need to pay Lender’s Mortgage Insurance (LMI). This covers the lender, not the borrower, and it can add thousands to the cost of the loan.

Some lenders allow it to be added to the loan, and some first home buyers may be able to avoid it through the First Home Guarantee.

Some lenders allow it to be rolled into the overall loan, and some buyers may be able to avoid it altogether if they’re eligible for the government’s Australian Government 5% Deposit Scheme.

Conveyancing fees form another part of the equation. Conveyancers handle all the legal work behind the scenes like reviewing the contract, title checks and settlement. Having a legal professional in your corner is even more important when it comes to off-the-plan purchases where contracts often contain extra fine print.

You may also be charged loan establishment fees, along with government registration and transfer costs, but your conveyancer will usually factor these into the final settlement statement.

And finally, there are the costs that continue long after the keys are handed over. Everyday expenses like rates, water charges, insurance and strata fees are easy to overlook when you are hyper-focused on simply getting into your new home, but can directly affect affordability, so should form part of your budget from the beginning.

Signing the contract and the cooling-off period

Once you’ve picked a property you like, you’ll receive a contract of sale and the Form 1, which sets out key details about the property, including title information, zoning and any encumbrances.

Before you sign, you should have your conveyancer review the contract carefully.

That’s because off-the-plan agreements often include extra clauses around things like build timing, design changes, sunset clauses and how the deposit is handled that do not appear in a standard established home purchase contract.

Once you’ve signed on the dotted line and your deposit is paid, the cooling-off period begins.

In South Australia, buyers generally have two clear business days after both parties have signed and the Form 1 has been served, excluding weekends and public holidays.

Use this time wisely. It is there to make sure your finances are still in order, your conveyancer is happy with the contract and that you feel comfortable proceeding with the purchase.

If you want to withdraw, you need to do so in writing within the cooling-off period. If you miss this window, the contract becomes binding.

From there, the focus shifts to keeping your finances on track while the property is being built.

How to stay loan-ready between signing and settlement

One of the biggest differences with an off-the-plan purchase is the construction phase; the wait between signing the contract and settling on the finished property.

Unlike buying an established home, that period could be as little as a few months, or it could stretch out far longer.

During that time, your pre-approval status may need to be renewed, and, put simply, your lender will want to see that your financial position has not gone backwards since they last looked at your financial position.

That usually means avoiding new debt, avoiding unnecessary job changes where possible and keeping your spending under control.

But it’s not all doom, gloom and staying at home eating 2-minute noodles. There is an upside that can work in your favour.

Used well, this period gives you extra time to build savings, reduce existing debt or strengthen your overall borrowing position.

If you plan to use the First Home Super Saver Scheme, it can also be a chance to make additional voluntary super contributions before settlement.

Staying in touch with your broker or lender during this time period also helps. If your circumstances change, it’s far better to flag it early than find out a few weeks before settlement that your finance needs to be reworked.

Why formal finance approval comes later with off-the-plan

Formal (unconditional) approval is the stage many first-time off-the-plan buyers misunderstand.

That’s because, unlike an established home purchase where formal approval usually happens soon after the contract is signed, with off-the-plan, your lender will generally wait until the property is close to completion.

Why wait? Because they need to value the finished property before signing off on the loan, and that cannot happen until construction is close to done.

As that point gets closer, the lender will reassess your income, expenses and overall borrowing position. You will usually need to provide updated payslips, bank statements and details of any existing debts, to confirm you still meet their lending criteria.

But the valuation really is the key here.

In most cases, it will all line up with the contract price and everything will keep moving ahead as expected.

But in the rare case where the valuation comes in lower than expected, you may need to contribute extra funds to cover the gap. While uncommon, it’s something all buyers should be aware of.

Finally, if you’re eligible for SA’s First Home Owner Grant, this is usually worked into the settlement figures at this stage.

Once formal approval is issued and any remaining conditions are met, you are ready to settle!

How settlement works when buying off-the-plan

Settlement is a huge milestone, but it tends to feel far less stressful when you know how each step works before the day arrives.

The settlement period starts when the developer advises that the build is complete and the property is ready for handover.

Before that point, you will usually have a pre-settlement walk through so you can see the finished home prior to settlement.

In the days leading up to settlement, there are a few practical details to sort out.

Building and/or contents insurance generally needs to be in place and ready to go, utilities should be arranged and if you’re moving in straight away, it pays to have all your plans sorted early.

On settlement day itself, your conveyancer will handle the money side of things.

The deposit you paid when you signed the contract is put towards the purchase price, your lender releases the balance of the loan, and any grants or adjustments are worked into the final settlement statement.

Once everything is processed and the funds have cleared, the title is transferred into your name. This is when your mortgage starts and home loan repayments begin!

A process that's more structured than you'd expect

Buying off-the-plan in South Australia involves more financial stages than buying an established home.

And it can feel like a lot to take in at first. But understanding the ‘what’, ‘how’ and ‘why’ behind the process can make it all feel far more manageable.

From pre-approval and valuation to formal approval and settlement, each stage plays a part in keeping your purchase on track.

And at the end of the day, the buyers who feel most confident at the end are usually the ones who had the right support from the start – a good broker, a capable conveyancer and a developer you trust all make a huge difference when it comes to purchasing off-the-plan property.

If you’re considering an off-the-plan purchase in South Australia and want to understand how the finance side would work for your situation, the Cedar Woods team would be happy to help you make sense of it all.

Cedar Woods Properties is a leading, national developer of residential communities and commercial developments.

We strive to create quality homes, workplaces and communities that people are proud of.

With award-winning projects in Western Australian, Victoria, Queensland and South Australia, we continue to place great importance on understanding our customers and their lifestyle, producing design solutions to enrich their lives.

For more than 30 years we have worked hard to think ahead, evolving our designs to always respond to the changing world in which we live and creating meaningful places that inspire connection and help us grow.

We work with our customers every step of the way to create a solid foundation for their future.

Because at Cedar Woods we know we are developing tomorrow, today.

DISCLAIMER: Any information provided in this article is general in nature and does not constitute financial or legal advice. Individual circumstances vary, and you should seek independent advice from a qualified mortgage broker, financial adviser, or conveyancer before making any property or lending decisions.