Pulling out a house near to exchange

[HappyKite2067]

We are near to exchange of our new build house and I’m now having huge doubts about going ahead with it. I’ve had a bad gut feeling throughout but as it gets closer it’s getting stronger!

Reasons:

1. Estate management fees and people telling me to ‘run away’ as they are life ruining
2. The cost of the mortgage is so much higher than our rent, and I’m genuinely worried we can’t afford it- I’ll only have £200 disposable income after all bills, petrol and food, and other half £500. At the moment, we have around £1500 left over between us.

Reasons why I’ve talked myself into going:

1. I need to move for my new job
2. We’ve been renting for 2 years and have secured an okay fixed deal
3. There’s very little choice in the area we are moving to and new build is probably (even with mgt fees the most cost effective)
4. We are TTC (although how we can afford one I don’t know)
5. We are both going to have pay increases next year and the year after.

Am I being unreasonable to pull out and stay renting, and maybe choose to rent closer to work to have more disposable income and wait for an older new build which needs less work?

I would stick. It's always very tight financially for first time buyers.

Btw, are you ftb because if so, there is no stamp duty to pay. If they have said they will pay your non existent stamp duty, you could ask them to knock it off the price of the house instead.

If you've got that much in savings what exactly are you worried about?

We have had an older house and sold it within 2 years, the work and up keep were crazy even after we’d renovated! Which is OH is so keen to get a new build.

Because I’ve worked like crazy for those savings and don’t want to blow them on a house if I’m living out my means. You can probably tell I’m a worrier with money by my savings! Grew up very poor and it’s hard to shake that feeling of always needing to have spare.

No we aren’t first time buyers. We sold our first home to move for my partners job and now are trying to get back on the market after 2 years off (which is so much more difficult that we anticipated).

I am also a worrier by nature and prefer to buy below my means having grown up pretty poor so I get you there OP.

In all honesty though, if you think getting back on the ladder is hard now, having a dependent makes it far harder.

If I was in your situation I would buy the house, delay TTC for a year (assuming you have the time to delay) and overpay the mortgage by the amount that you would be spending on nursery. You get used to your new outgoings and have a lower mortgage when it actually counts, win win.

I would also consider using some of your two year savings to lower the amount you need to borrow initially. Unless it is earning over 5% interest in your savings account?
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If you've that much cash the sensible thing to do would be to put down a far bigger deposit. Then you'll have much more give day to day.

Honestly, we looked at it and it really didn’t reduce the monthly costs by much at all. The mortgage advisor as advised against it, said it’s better in our high savings account than in a property right now, and I agree, if I do need to reduce hours then it’s there isn’t it!

You sold at a good time and now is a good time to buy so I would go ahead. Especially as you love the house, it's in the right location, you have room for your parents to stay and it looks like you can afford it. Fixing your mortgage for 5 years will at least give you security of knowing exactly what your repayments are going to be for the next 5 years and then re-assess.

We were advised against this, as it didn’t make much difference to our monthly amount (about £50) and we might need that money as available cash with TTC and maternity.

Thank you! Definitely will consider overpayment when we go up in pay!

There must be details in the house deeds which your solicitor should be able to advise you on. I.e. Subject to a 5% rise every 5 years or RPI which ever is higher. They can’t just be £150 uncapped - you need to bottom this out with the solicitor

They are uncapped, have a look at ‘fleecehold’ most new builds are now.

Not necessarily true with new build estates.

People want the "new" new builds of phase 2/3 and not the 3/4 year old houses that come without all the incentives/choice options the OP describes.

Equally if it's a phased development you may have to deal with a lot of building traffic/noise.

On the other hand if the development is finished then that's a potentially better outcome but a lot depends on the desirability of the development as a whole.

There are good reasons why new builds offer incentives....

Without knowing the exact development/house/location it's impossible to give good advice.

I don't think this is an issue about affordability however.

I am concerned about the allocation of disposable income.

Ultimately with a new build it's a trade off. You should get a house that's nearly maintenance free for some years but you will not (in a positive market) gain as much equity on it as an established property, especially a fixer upper.

Yes, they are uncapped. Crazy but true.

Ok...A few things.
Would you get anywhere near the same mortgage offer if you had a dependent (TTC plans). Most lenders take this into account as a cost and you may find it restricts your borrowing. Might be better to buy before baby
Your costs mat 'uncapped' but they can't be 'made up' realistically how much is grounds maintenance etc ever going to cost?
Better to move once/make the biggest jump you can in one go as the dead cost to buying and selling are considerable.

There are overpayment calculators that allow you to compare the benefits of keeping money in savings and overpaying mortgages. Do make sure your mortgage provider allows overpayments!

Double check that your mortgage provider does have a lower LTV for new builds. My sister found out at the last minute that her mortgage provider only allowed 85% ltv for new builds having previously offered her a 90% mortgage. She was asking for 87%ish so thankfully she was able to find the extra.

Both houses we have bought we nearly pulled out of close to completing. The first one we were prepared to pull out the week of exchange due to incompetent solicitors (we got a 25% refund level of incompetence) and obscure rent charge that needed resolving before buying it.

My sister loves her new build. I would hate it. Neither of us are right we are just different. She likes the fact that it's all done she had the snagging list, people to call. Less stuff to go wrong. I reveal in the process of making a house my home and are currently renovating our third house. It's slower with a child in tow so if you are looking at starting a family and not a fan of DIY I think a new build is probably the right call for you. Some people love flats and city life others it's a house in the countryside with only sheep for neighbours. If you are lucky house is about what is good for your soul. What makes you happy. A place you look forward to returning to at the end of a long day at works. The last house we bought because it gave us financial freedom and it was a good location for our jobs. My job moved location within 3 months of buying a the house and my partner after 2 years. The financial freedom was good when he hated his job but the location was never right for our souls. We didn't enjoy coming back to it at the end of a long day. Our new house we absolutely do. We couldn't have made the move prior to covid though as it's a commute that's fine for 2 days hard work for 5. I would be asking myself to searching questions about whether the house ticks all the boxes about the life you want to live.

They might be uncapped - I agree these are the biggest con - but there has to be a review date - in the absence of this the solicitor should be advising you to think long and hard because if this is truely the case many mortgage companies won’t lend on them

Are you using your own solicitor or the builders recommendation?

Last new build I bought was a freehold with initial management fees of £100 per year. When I sold 7 years later, they were £1200 per year.

When I questioned the risk of uncapped fees with my solicitor, I was told they were very unlikely to rise and there was nothing to worry about. I told the solicitor to put a clause in saying they were percentage capped each year. The management company refused.

When the fees got to £500pa, I did some research. Seems it was quite a common thing for builders solicitors to minimise the risk of management fees increasing. I don't know if it still is.

I will never buy a property again which has management fees. I can understand why your gut is telling you to pull out.

Yes our solicitor hasn’t glossed over them but equally we’ve knocked on doors (as it’s a five year development) and the price hasn’t increased in 3 years. £1200 would be completely unaffordable for us which is why I’m so panicked and want to pull out! But then the other side is that our rent could go up at anytime, we need to move for my job, if we choose an older build- the area we are in has limited options with the ones available either new build leaseholds 5+ years old or very old needs a lot of work properties.

Also- how many houses were on your estate?

I bought 2 years into a 4 year development.

The management company put the price up as soon as the builders sold the last house.

I remember the letter informing me that the builders had been subsidising the management fees and as residents we were now responsible for the full amount.

Don't take the current lack of increase as a good sign.

Don’t they take dependents into consideration with mortgages? So an offer after you have a baby might not be as good. Fwiw we don’t have a penny left over after food and bills etc to save so 700 is good!

Was it a huge increase? We do expect it to go up but it’s by what is what is concerning.

Yes they do! Another reason we are thinking of getting the house before we have the family!