New Build - exchanging more than 6 months before completion. Mortgage expiry.

Kiwikind

Hi folks

Girlfriend and I have found a new build we like, and got them down to £250,000. We have £80K deposit (her ISA and other savings) so we're at a 68% LTV. Between us we take home £4K a month. And having crunched the numbers on any number of mortgage calculators we can easily afford the £700-£800 repayments on a mortgage of £170,000 at any of the current rates.

We went into HSBC today to apply for their 2.99% lifetime tracker. I'm already a customer. We had an appalling experience:

- As soon as we told the advisor that we had to exchange in 5 weeks and pay £25K at that point (10% deposit), but that the builds won't complete until late Dec/Early Jan, she basically ruled us out and said that no bank would offer a mortgage for longer than 6 months.

- I asked if that were to happen we could just ask for an extension. She said they couldn't guarantee it. I know they can't guarantee it but I was looking for some vague sense of "but it happens and it's not something to worry about".

- She said we'd have to re-apply again.They wouldn't even renew it but at whatever the current rate is. Start from scratch, no guarantees you'd get it because your circumstances may have changed, you may be left without a mortgage etc etc. All terribly scary stuff.

- The final straw was when she said she could at least offer us a certificate that could show the build company (Taylor Wimpey) that they'd in principal offer the right amount. Her computer came up blank and we were told that that meant usually that one or more people has a poor credit score.

- We checked our scores with Equifax. I have 446, girlfriend 422. This is considered "good" and shouldn't be a problem.

- We left feeling like the whole thing is really dodgy and we shouldn't be doing it. We want this place and see no reason why we wouldn't be able to get a mortgage, but we feel like HSBC really don't give a damn. It's a shame because they have a great rate.

A friend suggested Santander. They guarantee rates for 12 months and apparently it's very normal for them to extend their mortgages with very few questions asked. As there's no fees until you take on the mortgage, my friend said we could use it as an insurance policy. We could always wait until 3 months out from completion, and then re-apply to HSBC. Then just walk away from Santander cost-free.

What are your thoughts on this? And experiences with HSBC/Santander in these matters? Is it all scaremongering and non-commital legal stuff? Or is this a genuine huge problem? I really don't see why a bank wouldn't offer us a mortgage given the deposit we have and our ability to pay off the mortgage. I'm paying more for my share in rent than what we'd be jointly paying in a mortgage!

thanks

Joe_Bloggs

I would think you would have to be a sophisticated property speculator to put up 10K eight months in advance on something that may or may not be ready in eight months. Who is to say what the place will be worth in that amount of time.
J_B.

Simon_gloster

The rate or offer will be valid for 3 months usually or if the product has a date on which it should draw down by.

HSBC advisor is right, if the product expires they do not have to offer you that deal again. You have to go for something a that time.

Abbey holdinh a rate for 12 months!!!!!! I doubt it. Whats in it for them.

You could keep reapplying to hsbc for that rate, but if they say no, there is nothing you can do. By the way complaining would be a waste of time

Trollfever

we had to exchange in 5 weeks

The sales person wants to boost their sales figures before the end of Q2.

Run away............fast.

PaulLuke

The big problem with your scenario is that if you exchange now and the mortgage offer runs out you might find
(a) that you can't get a new mortgage offer due to an unforeseen change in circumstances (such as redundancy/illness); or
(b) the lender might value the property differently in such a long time you might be in a position of not being able to borrow enough.

People have been caught before where they have exchanged, the mortgage offer has expired and they have been unable to obtain a new offer, leaving themselves committed to buying a property with no way of funding the purchase.

Quite simply it would be madness to commit to such a long term purchase. Also as an aside search for the recent threads on HSBC mortgages and read up on the problems caused by the way in which they have reduced their panel solicitors (although this is due to change shortly)

Kiwikind

Thanks for the responses folks. We have to assume our own circumstances won't change in 7 months. We would be in trouble whether if we already had a mortgage anyway if that happened so doesn't it amount to the same thing ie. pay your mortgage or lose the house? We have a loan to value ratio of 68% based on a £250k property with £80k deposit. I dont know how to calculate it but the house would have to drop in valuation massively to push us into a higher LTV than the 70% bracket we are sitting in, right.

I feel we should get a mortgage with Santander or someone who guarantees their rate for longer than six months and who has a proven record of extending mortgages. Then 3 months from completion, shop around for a better rate and if accepted walk away from Santander. No fees if you dont take their mortgage. At least this way we know we at least got a mortgage. I dont want to exchange without one. I know there are risks at the other end but thats the game we play.

3.34% 2 year Santander tracker, anyone?

Dave_Ham

Ok - so a few observations here..

Firstly, I do not imagine that you really pushed them to get a developer to £250k. I do not know the area or development and could be well off, but would think given the stamp duty threshold when pricing they would have gone "well we want £250k for that house, put it up for something that will make the punter think they get a good deal at £250k"

Next stop Santander - some mate. Have a proper read of this forum and get real peoples experience of Santander lately. Aside from the last 6 months, they were a preferred lender; now they are actually the worst. Search the forum for "Santander mortgage" and have a good read over a cuppa

If you buy this, there is no merit in getting a mortgage now; absolutely none. You will pay for a valuation, that I am unsure if could be completed in any case. You will get a rate no bank will let you keep for this long.

If you want the house, buy it and put your money in knwoing that your deposit and circumstances are good and that you will get a mortgage - although it appears not from HSBC.

This would not float by boat at all, say you lose your job, split up or forget to pay a credit card (it happens) for a month??

Your call, but please go in and make the call with your eyes open..

Kiwikind

Thanks Dave. The 1 bed property is in Wandsworth. Its the 130 garratt lane development and this was on the market for 280k. Now I know that they arent worth that much and that the reason they dropped it down to 250k from 280k is because they are still making a good profit. But looking at other flats of a similar design in this area (its only 1 street away from mine now) are aroud that price. The small 1 bed we are renting now is aapparently worth 250k or thereabouts and isnt as nice as the new build.

Will have a proper look at Santander. We would only be using them as a backup in case we cant get the hanc one if we apply later.

I know there are risks but we are in our early 30s, earn good money and are in secure jobs. If we all wirried about maybe losing our jobs in a years time I feel we wouldnt ever get anywhere!

Dave_Ham

Kiwikind wrote: »

Thanks Dave. The 1 bed property is in Wandsworth. Its the 130 garratt lane development and this was on the market for 280k. Now I know that they arent worth that much and that the reason they dropped it down to 250k from 280k is because they are still making a good profit. But looking at other flats of a similar design in this area (its only 1 street away from mine now) are aroud that price. The small 1 bed we are renting now is aapparently worth 250k or thereabouts and isnt as nice as the new build.

Will have a proper look at Santander. We would only be using them as a backup in case we cant get the hanc one if we apply later.

I know there are risks but we are in our early 30s, earn good money and are in secure jobs. If we all wirried about maybe losing our jobs in a years time I feel we wouldnt ever get anywhere!

Take your point and I agree that you cannot always be looking over your shoulder, just feel prudent to mention..

Santander are really not what you are after - you are literally going to waste time and money - your friend was probably talking pre 2012 use of Santander/Abbey..

Whatever you decide, good luck

Joe_Bloggs

If the alleged price of 250K was to fall to 243K ( down 2.8% ) then LTV would be 70% for the OP.
I have travelled past the aforementioned structure. There are many better buys (at least two bed) that do not get the publicity because they are squeezed out by 500K plus properties in local media.
J_B.

The_J

Exchanging on a new build in advance of completion is not unusual. What's unusual is doing it more than 6 months in advance. Say to them you'll buy it but you'll only exchange 6 months prior to completion so the mortgage offer you exchange on is still valid at completion.

Otherwise tell them to do one.