New build mortgage help please

[ashley69ly]

Dd and her partner are FTB looking to buy a new build with help to buy. They've seen a development they like with a house that is suitable and affordable. The problem they are facing is that these houses are being released for reservation in September but won't be ready until May. They are understandably anxious about exchanging contracts so early when their mortgage offer will likely expire before the house is ready. They've found some mortgage products specifically for new builds which are valid for 9 months but are still uncertain about going ahead, as finances are tight and to have to reapply for a mortgage and pay the associated fees again will really hurt.
Would appreciate if anyone could share their experiences of buying in this situation and to get an idea of how often the house is not ready on time to gauge how much of a problem it is. They really don't want to be in the situation of loosing the hard saved- for deposit!

We got a new build and it was a week later than expected but that is all. Most of the sites want you in before End of April as it’s the end of financial year so they tend to work overtime to get people in quicker. Also we put a £500 reservation fee on ours but we didn’t arrange the mortgage until much nearer the time. We did use a help to buy financial advisor who was associated with the developers.

We've exchanged on a new build and are just waiting for completion.

I'm not sure if it was just our builders but there was a clause that said if for any reason the mortgage wasn't offered at conpletetion we could back out without losing our deposit. I think it might be the help to buy that adds that protection but double check with their solicitor / builders before exchange if it's really worrying.

Thanks for that info User, I'll get them to check that out. The developers appear to be wanting them to exchange 6 weeks after reservation so the end of October but if they apply for a mortgage for then it, the offer will defiantly have expired by completion but it would be good if the help to buy scheme does give them some protection.

I'd have thought they would be able to renew their application without fees near to the time it expires if necessary. It took us a while to sell our house and we had to renew our application. It was quite straightforward (Nationwide).

If they are FTB's I wouldn't have thought they would have a huge problem if the house wasn't ready in time if they have nowhere to vacate otherwise?

Many of the big developers want you to commit to buying months before the house is out of the ground and I agree it's risky. Is there no way they can wait? I assume you must be looking in an area with high demand?

FWIW, I also think HTB is a bit of a risk too. We looked into it and discovered we would be very restricted with what we could do to the house while the government had a stake in it. Think no extensions etc.

Obviously, if it's the only way to get on the ladder, then it's the only way, but looking at properties they can afford without HTB will ultimately get them a bigger, better house faster, with fewer restrictions. Can they look at something less than ideal now and look to sell again in a few years time? We managed to turn a 15k deposit on a £90k house into £65k on a £200k house in about 7 years.

The middle house was a new build from a local developer. It was really too small, but we bought something we knew other people would want. We paid the mortgage and did nothing else and made £35k in just under four years. We wouldn't have bought new build from say Stewart Milne or Persimmon and their developments in our area are now selling at 25% less than the original owners paid. Any negative equity would most probably wipe out their deposit anyway. This won't work for everyone, but perhaps it's a scenario you could present to them as an alternative?

Our developers wanted us to exchange within 28 days! It took about 9 weeks in total as the mortgage took a while to go through.

The other thing to look into is the estate management charges, pretty much all new estates have them. Try googling fleecehold and you'll get the idea. On our estate we have it in our deeds that we can sack the management company but some estates don't have this and you are forced to pay whatever they demand or you risk losing your home.

There was no restriction with help to buy for extensions but any increase in value would increase what you owe back as it's 20% of the value not just what you borrow. New builds tend to depreciate a bit in the first couple of years which is when we will remortgage and get rid of the loan, then we can look to extend and get to gain any property value increases.

We bought a new build from Persimmon 2.5 years ago with help to buy. Our house was pretty much built when we reserved and there was still a two month delay. And others on the development (who reserved at the plot stage) had a 5 month delay. A friend of mine bought in another area of the country from another well known developer and hers was delayed 4 months. So yes, in my experience it is normal to expect delays with new builds. However, they also seemed very relaxed re the exchange 'deadline', it appeared the solicitors on both sides were quite slow and we exchanged about a month late. As pp have said there should be a clause in contracts so that you don't lose your deposit if you don't complete. However, I don't think there would be an issue renewing the mortgage offer after 6 months.

I think having a big wait is a good sign. We reserved in August and moved in the following June, but it was a very popular development in a good area. We ended up making a lot of money on it, but I’d be wary of buying a house that didn’t have a long wait between reservation and completion because that, to me, would suggest they don’t have that much demand which might reflect future desirability when it comes to resale.

In terms of the mortgage, we went through the developer’s recommended broker with no problems.

Our mortgage offer from the bank has a 12 month expiry as we told them it was for a new build when going through the application. Not sure if that's across other lenders or specific to ours but they made it sound normal in our circs.