Off plan properties

mrk1

Hey guys

Im looking at buying an off plan property but I need some advice as Im new to this kind of stuff. Im a little confused on how the payment/mortgage works. How does the bank value the property when isnt built yet. Or do I apply for a mortgage once the building is built? Im unsure when to get the mortgage tbh

Also has anyone else bought off plan? Whats the experience like? Any pitfalls that I should look out for?

Any feedback and advice would be greatly appreciated

Fire_Fox

Welcome! You apply for the mortgage before you exchange contracts, you must not exchange without being confident that you can raise the funds based on your income. Depending how long between exchange and completion your mortgage offer may expire, you then reapply right before completion and the lender can insist on a valuation at that point. Risks include your financial/ work situation changing so you cannot raise a mortgage at all, the valuation being too low and you not getting enough money to pay the agreed price, lenders tightening up criteria and withdrawing your mortgage offer.

The longer between exchange and completion the higher the risk in a recession. Bear in mind if you exchange and fail to complete you are in breach of contract, the developer can take you to court for any losses which can be thousands of tens of thousands on top of your lost deposit. Do run an advanced search, there are many threads discussing off plan.

littlesparkles

I'm buying off plan and reserved my plot at the foundations stage. I then applied for a mortgage and instructed a solicitor. Nationwide visited the site to do a valuation and this involved looking at the plans and the houses already built. I have a mortgage offer that is valid until after the house should be finished (it was for 6 months). My contract with the builder will allow me to pull out of the purchase if I can't get a suitable mortgage and my solicitor is asking for a long-stop date which means if the house isn't ready by then I can pull out. This date happens to be when my mortgage offer expires.

When I spoke to the builder's recommended financial advisor I was told that the builder would pay any additional application fees etc if I had to re-apply because the initial mortgage offer was my long enough. However I chose to arrange my own mortgage instead but it is worth asking the builder how they can help you.

I reserved at the beginning of July and have not yet exchanged. The builder says exchange within 28 days but apparently very few actually manage this. My exchange has been delayed due to the enquiries I have made to the builder's legal team. These have been genuine questions and requests for information but have conveniently delayed exchange several months which means that exchange will take place a lot closer to completion now.

Good luck!

googler

Pitfalls;

You may pay the builder a deposit, the builder goes bust, and you become one of a list of creditors who may or may not get their money back.....

mrk1

Thanks for the replies.

I rang the agent today so he could break down the payment plan. The deposit seem a little high to me. The property is valued at £70k and they want a reservation of £5k and further £21k at exchange. Does that seem high? According to the agent its because banks only offer 65% of the property value when the property is off plan? Is that true?

Fire_Fox

Have you run an advanced search yet?

mrk1

Sorry. I should have mentioned that in my previous post. I ran a search and nothing on off plan properties came up

littlesparkles

I definitely posted recently about off plan in response to someone else's post (can't link from my phone) but click on my name and look at my previous posts. Also search for new build.

I am buying from Taylor Wimpey and my payments are as follows:

£500 reservation fee back in July
10% of purchase price to be paid at exchange
90% of purchase price on completion (minus the £500 reservation and the 5% the builder are paying).

I am actually putting 15% of my own deposit down but only 10% is needed at exchange.

Fire_Fox

mrk1 wrote: »

Sorry. I should have mentioned that in my previous post. I ran a search and nothing on off plan properties came up

There are 68 threads with 'off plan' in the title
http://forums.moneysavingexpert.com/search.php?searchid=133822135