The Ins and Outs of Buying your First Home Off-Plan

The Ins and Outs of Buying your First Home Off-Plan

Buying a new home represents a new and exciting chapter in your life.  If you’re a first time home buyer and you’re buying off-plan, you may find all the administration, paperwork and new responsibilities overwhelming if you don’t understand the reason for them or how they all fit together.  

Cosmopolitan Projects, one of South Africa’s largest developers of affordable housing, offers a handy checklist of essential tips associated with buying a home off-plan:  

  • Work with an NHBRC registered builder/developer – The National Home Builders Registration Council (NHBRC) is a regulatory body of the home building industry. The NHBRC certifies builders who meet the prescribed industry standards criteria in terms of technical competence, construction experience and financial capability.  The law also requires all new homes to be enrolled with the NHBRC at least 15 days prior to construction. Enrolling your home building project with the NHBRC protects you against poor building practices.
  • Buying off-plan means you are buying  a new home in a development or housing scheme that has not been built yet.  You will choose your stand, home layout and finishes according to what is on offer from the developer, and your home will then be built for you subject to you qualifying for a bond.  The developer may have one constructed unit as an example, or they may have models and layouts of what the final property will look like. Cosmopolitan Projects has show villages that depict the products.  Either way it’s really important to understand exactly what you are getting. Ask questions, and don’t sign up until you know exactly what you are agreeing to.
  • Applying for a bond – once you have agreed on your home and plans, the developer will provide you with a formal quote to review and accept.  This quote is then submitted to the bank in order for you to apply for a home loan. If the bank approves your application, you will receive a bond approval offer from the bank. You will be asked to review the offer and accept it if you are happy with the terms and conditions from the bank.
  • Bond registration – the attorneys handling the transaction will then receive instructions from the bank to start with the registration process. They will prepare all the necessary documents for you to sign. However, before they start with the registration process, the attorneys will ensure that all the conditions stipulated by the bank are met.

At this stage of the transaction, it is important to note that there are two types of home loans:

    • Building loan: the attorneys register the property in your name and the developer can start building your home. The bank will pay the developer directly at various stages in the construction process.  The bank will only make a payment at certain predefined stages against construction work already completed.
    • Turnkey loan: The developer will start building your home and must complete the construction before the bank will register the bond.  You will then have to verify that your home has been built before registration can take place. The developer gets paid after you have verified to the bank that you are happy with your home. In other words, the homebuyer only takes transfer of the property once it is fully complete.
  • Life insurance:   Upon approval of your bond, the bank will require that you have life insurance to cover you for the amount of the outstanding bond.  In the event of the death of the primary earner and contributor to the bond repayments, life insurance will settle the outstanding bond amount and also ensure that your family is not lumbered with the home loan debt owed to the bank.  It protects them from a worst case scenario of not only the loss of a loved one, but possibly also the roof over their heads.
  • Quality inspections – During the building process, the local council building inspector, NHBRC inspector, structural engineers and the bank assessors will independently monitor the process to ensure that the building process meets the required SANS and building regulations. It’s also important that you monitor and inspect your home throughout the entire building process.
  • Pre-occupation inspection – Once your house is complete, the developer will arrange a handover inspection at your home. This inspection process is very important. You will need to take your time to go through your home to ensure that you are happy and to check for any snags or items that need to be sorted or fixed.

If you are in any doubt at the time of signing up, set a time to meet with the developer’s agent or marketing manager and clarify any queries you may have upfront and what your responsibilities are.  With all the formalities and administration out of the way, you can relax and enjoy your new home and the making of many happy memories with your family and loved ones.

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