First-Time Buyer: Reservation Made (In Principle)

Lost_Prophet

Hi All,

Just wondering if there is any advice anyone can give on first-time buying on New Build properties

We have submitted a £500 deposit which won't be cashed until approval from Plumlife comes through

Any tips on what will be coming up and how to overcome any problems? The property will be completed mid-December

Cheers

kingstreet

Is this part of some form of social housing scheme, shared ownership or shared equity?

Lost_Prophet

It is the Shared Equity whereby the Government owns 10%, Builder owns 10% and I own 80%

Interest free on the 20% for 5 years and then you either remortgage for 100% ownership or incur a year interest rate of 1.75% on the 20%

kingstreet

Ok.

Just to explain, shared equity means you own 100% from day one. The "shares" owned by the Govt/builder are secured by a second charge. This can be helpful when you decide to sell, as you are selling all the property and not just part of it.

Shared ownership you only buy a portion of the property and the remainder is rented to you, normally by a Housing Association. When you sell, you only sell your share.

The only purchase problem I can think of surrounds timing. The assumed completion date is dependent on the weather. If the date is put back, when would your mortgage offer expire? Would it last long enough to be able to cope with an extended completion deadline?

In terms of ownership, these would be my concerns;-

- when your first mortgage product ends, can you remortgage or will you be stuck with the same lender. Will you be able to get a deed of postponement?

- will you be able to find the money, or have the equity, to repay the second charge in five years' time?

- what happens if your circumstances change? Will you be able to sell quickly, or will you end up in negative equity?

You need to go into such a transaction with your eyes completely open and don't be dazzled by the shiny appliances and 3/4 sized furniture used in the showhomes.

Lost_Prophet

I got the naming wrong, it is the First-Buy whereby we don't pay any rent on the equity owned by the builder/government until Year 6 of the agreement.

Thanks for the input on the timing - I will make sure we are covered on the mortgage once it is arranged

Regarding your other points...

"when your first mortgage product ends, can you remortgage or will you be stuck with the same lender. Will you be able to get a deed of postponement?" - I have been advised by my housemate that it is recommended to take the maximum period mortgage for this reason as it is the payment each month. On the 6th year, you then re-mortgage for full ownership

- will you be able to find the money, or have the equity, to repay the second charge in five years' time? - Yes, like with all of my major purchases lately, it has been tight on month 1 and then much better onwards so in 5 years time, being assumptuous here I will be in a healthy financial situation

- what happens if your circumstances change? Will you be able to sell quickly, or will you end up in negative equity? - I'm unsure on the answer to this as it is a new build and so I am unsure what demand is in the area or the sale price of similar homes

You need to go into such a transaction with your eyes completely open and don't be dazzled by the shiny appliances and 3/4 sized furniture used in the showhomes - Already covered :-) We have seen 3 properties in which this is by far the best and having research it A LOT over the last couple of weeks I read what the tips and tricks were of the showhome

Have you previously bought a new build?

Mickygg

I have. Do a search as plenty of posts here about new builds.

Things to look out for or expect are many snags, lack of parking, potential loss of value being a new build, thin walls, small rooms, little soundproofing, social housing.
Good things are energy efficiency, no repair costs for a while, lovely new feel, blank canvas to make your own.

kingstreet

Lost_Prophet wrote: »

I got the naming wrong, it is the First-Buy whereby we don't pay any rent on the equity owned by the builder/government until Year 6 of the agreement

Firstbuy is shared equity, so you own 100% of the property from day one as I explained. If you do not repay the second charge at the end of year five, you begin to pay interest on the loan, not rent.

Have you previously bought a new build?

No. Does that preclude me from answering your questions in an informed and objective manner?

I've been involved in house purchases and their funding for 28 years and work for one of the Orbit Homebuy Agents' mortgage specialists in the Midlands.

Lost_Prophet

kingstreet wrote: »

No. Does that preclude me from answering your questions in an informed and objective manner?

I've been involved in house purchases and their funding for 28 years and work for one of the Orbit Homebuy Agents' mortgage specialists in the Midlands.

I'm not being dismissive of your opinions/experiences - I was just curious as to your background whether that be from a homebuyer themselves or an Agent (as you are). Either one of them would be beneficial but in different ways

Homebuyer would be great for everything post-sale and ways they dealt with everything from their side
Agent would be great for everything in the build-up to completion and all everything from their side

Thanks for your input. Do you have any other useful insights?

kingstreet

It's okay. We get a large number of threads on here where people only want to hear they are right and they can't accept the possible consequences of their plans.

As long as you have the full facts and consider the "unforeseen" possibilities, you should be fine.