New build not yet finished.. applying for 2 mortgages? Is this legal

Daniel_gecko

I've also posted this in the mortgage thread since it's kind of house buying and kind of mortgage... Feel free to delete one if needed!


Hi all.

I am buying a new build which is scheduled to be finished in around 7 months. However I have been told I need to apply and be approved for a mortgage in order to exchange the contracts within the next 28 days.

My mortgage adviser has told me that if I apply now and pay application fees such as a £99 booking fee and a £400 valuation fee.. the mortgage offer will likely expire before the house is finished and I run the risk of having to reapply and spend another batch of money on the application fees.

I have been advised to apply for a completely fee-free mortgage with a poor interest rate now so that I am mortgage approved and able to exchange contracts within the next fortnight.. and then in 4-5 months time I will simply ignore the first application and apply to a new & better mortgage elsewhere.

Is this illegal or unscrupulous?

Also - when I apply for a mortgage and they say the offer lasts a number of months... is it the interest rate itself that is guaranteed for that number of months or only the offer to lend the money?

poppysarah

Daniel_gecko wrote: »

I've also posted this in the mortgage thread since it's kind of house buying and kind of mortgage... Feel free to delete one if needed!


Hi all.

I am buying a new build which is scheduled to be finished in around 7 months.

Have you exchanged?

Why not wait until the house is built before exchanging? A lot can happen in 7 months.

Daniel_gecko

Part of the reservation agreement was that contracts would exchange within 28 days. I thought that was standard with Taylor Wimpey reservations.

(I am a FTBer by the way)

poppysarah

Daniel_gecko wrote: »

Part of the reservation agreement was that contracts would exchange within 28 days. I thought that was standard with Taylor Wimpey reservations.

(I am a FTBer by the way)

I think it's madness to exchange in this climate so far in advance.

What if you can't get a mortgage in 7 months time? What happens then?

Is your solicitor one you've picked based on personal recommendation from friends/family, or one Taylor Wimpy have encouraged you to have.

You need to know exactly what goes on if

1. You can't get a mortgage when the house is built.
2. What happens if they stop building your house.

evoke

Exchange is likely to require you to pay a 10% deposit. Have you thought about that? The deposit will be non-refundable.

hazyjo

Don't exchange... same views as those above. Seven months is a huge length of time. Also, what if it overruns and what if the market drops horrendously in the next 7 months. You'll be overpaying anyway what with it being a new build. Chances are you'll be in negative equity (unless you have a massive deposit) as soon as you complete. You probably will be anyway because it's a new build, so make sure it's somewhere you can stay for a long time, even if your circumstances change. If you think it might only suit you for a couple of years, think very carefully before buying it anyway...

Good luck.

Jx

Daniel_gecko

Reservation fee was £1000, no deposit is to be paid until the completion in September time.

I would be surprised if we weren't offered a mortgage. We have 50-60k in cash and the property is being bought for 170k. (We only need a 70% or so mortgage). I'd also be surprised if they stopped building the house, they're the last few on an already established development. However you are right, I should probably ask about that. I would at least want my £1000 reservation fee back.

As for the solicitor, it is one Taylor Wimpey advised as he already did most of the houses on the development and is an expert for new-builds and first time buyers. The fees looked competitive so I didn't really worry too much about it.



Reading things like this on the internet made me think the contract exchange within 28 days of reservation is normal;

hip-consultant.co.uk/blog/considering-buying-new-build-properties-123/

"The builder will often impose a short deadline by which you must exchange to ensure that you do not lose your reservation fee and it may offer a number of incentives."
"If contracts are not exchanged within the reservation period then the builder may sell the plot to someone else, in which case the reservation fee will be lost. As a result it is important to ensure that before reserving a property you have a solicitor instructed and a mortgage agreed in principle, so as to avoid delays."



It's mostly the issue with applying then backing out of a fee-free mortgage just to get through the contract exchange phase that's bugging me.

I'm also not too worried about prices dropping. The other houses on the same development of the same design in similar plots sold for almost 190 just several months ago. This is an end of development offer mixed with good negotiation skills. Plus rates are nice right now.

poppysarah

Daniel_gecko wrote: »

As for the solicitor, it is one Taylor Wimpey advised as he already did most of the houses on the development and is an expert for new-builds and first time buyers. The fees looked competitive so I didn't really worry too much about it.

And is an expert for Taylor Wimpey.

Most conveyancing solicitors can handle new builds and first time buyers.


I'd always want to know what the neighbours were like BEFORE buying a house too.

JQ.

It does not matter that the deposit is not payable until Completion, if the contract at Exchange makes you liable for the deposit and you walk away from the purchase, for whatever reason, you will still be liable for that deposit and you will still be contractually bound to complete.

I would be vary wary of using the solicitor recommended by the developer - there exists a clear conflict of interest. You need to make sure you fully understand your liabilities when you exchange. It's not necessarily your ability to get a mortgage, as the numbers you've stated appear quite compfortable, but what happens if :

You both lose your jobs
the housing market takes a tumble and the value of the house drops 15%
interest rates go up - are you still comfortable at 10%

None of the above may happen and it may be a very good purchase. But all everyone is saying is that in these turbulent times nobody can predict what will happen in the next 7 months, however, you are making the biggest financial commitment of your life on the basis that everything will be the same in 7 months - it may not. Make sure you have all eventualities covered.

In answer to you question - I see no problem doing what you are proposing with regard to the mortgage application. You can make as many applications as you like - it only becomes an issue if you make lots and lots over a short period of time as the numerous credit checks on your credit record can look bad. But that would not apply in this instance, so you should be fine.

DannyboyMidlands

Why not just buy it when it's finished?

No.........hang on...........don't tell me...........they're flying off the shelf and if you don't exchange now you'll miss out?

It's funny how everything I enquire about buying (from a used car to a 2nd hand bike to a house) is just about to fly off the shelf.

CloudCuckooLand

Its hardly "end of development" to not only not be built yet, but not to be built for 7 months.

What if one of you loses your job? Even if straight into another job, it could involve a probation period and scupper any mortgage, let alone a decent one.