When do you apply for mortgage on a house not yet built?

Abbymoo

Hi all,

I could do with a bit of advice.
We've had an offer accepted on a new build with Barratts, but, well, it's not built yet. I was wondering how this works when applying for a mortgage?
We paid the reservation fee (well, OH did, I don't know if he was right to or not, I wasn't there when he made the call)
So as the house isn't built, do we apply for the mortgage now, or do we wait a few months until it's pretty much up (completes in February)
Also, are there any other tips/advice you can give? We're going to see their financial advisor tomorrow and I'd like to be armed and ready with anything we need to know.

Thanks!

n90bar

Hi

Have went through a similar process however with a small local builder. When we had our offer accepted the house wasnt built. The builder didnt and has never offered a reservation fee method of accepting our offer so we were left with no option but to make our offer, and exchange contracts on the basis of fairly detailed plans and specifications of how the finished article will look. i did alot of research on here abd I found generally the advise was that this method was risky. But we did research the mortgage market and was reasonably happy that we should be able to obtain the mortgage

I would say to a couple of things -

When you apply for your mortgage and an offer is issued it will have a date of expiry - if the house isnt ready for occupation by this date it may not be possible to extend your offer, leaving you unable to complete and potentially having to go threough the whole mortgage application process again - and of course paying more feers, credit searches etc

Be extremely cautious of the entry date your builder has given you - ours was originally Xmas 12, then it slipped to Feb 13 and now its currently April 13 and the house is well under way to be being built. Bare in mind the builders can loose day after day of work due to the weather and I dare say they wont be working on site over xmas/new year. I cant see how your house will be ready in Feb if it hasnt started to being built.

I hope this is of some help....

n90bar

oh and personally wouldnt touch any builders financial adviser with a barge pole....I would highly suggest you find a local whole of market broker who can tailor the mortgage to suit you, not them!

sirmosh

n90bar wrote: »

oh and personally wouldnt touch any builders financial adviser with a barge pole....I would highly suggest you find a local whole of market broker who can tailor the mortgage to suit you, not them!

Couldn't agree more, I'm always weary of sharing my finances with people connected to the sale in some way too since they'll know what you can afford and may try to push a harder bargain.

Abbymoo

Re. not seeing their advisor. I think it's because the offer isn't a straightforward sale. The price was 179k. We offered 165, they said yes but the price will stay the same and we'll make up the difference in deposit contribution, paying stamp duty/legal fees etc. I'm utterly confused by it all I must admit. I'd much rather just buy a normal house with a normal offer process and a normal mortgage but OH wants this new build one. Urgh. My head hurts.

kingstreet

You'll be expected to exchange contracts quickly, with completion on notice when the property is finished.

As such, you need to apply for a mortgage immediately and appoint a solicitor. The valuation is normally pre-done on a block basis with the builder contacting a number of lenders/surveyors before they even start building.

Builders normally have a number of advisers on their panel. The advisers have nothing to do with the sale, nor do they exchange information. I have contacts with several builders and all they want is a mortgage application done and processed quickly. They get nothing from the relationship and under no circumstances would my advice or arrangement be influenced by the builder.

thelem

Abbymoo wrote: »

The price was 179k. We offered 165, they said yes but the price will stay the same and we'll make up the difference in deposit contribution, paying stamp duty/legal fees etc.

They do that so the price shown on the Land Registry data is £179k, and the person negotiating on buying the house next door can't say "You gave that person £14k off, we want that discount too".

Abbymoo

thelem wrote: »

They do that so the price shown on the Land Registry data is £179k, and the person negotiating on buying the house next door can't say "You gave that person £14k off, we want that discount too".

So it's normal then. That's a relief. I think I read these boards too much. I'm terrified they're going to screw us over coz we're hopelessly naive! :eek:

Yorkie1

Have you exchanged contracts yet? If not, make sure your solicitor ensures there is a clause in there to allow you to withdraw without being sued if you can't complete for a reason such as getting a mortgage.

caeler

The builder will require you to exchange in 28 days whether it is built or not! You need to apply for your mortgage now! Some mortgage providers will make sure the offer has a longer expiry date than normal because it is a new build. Nationwide did that for me. New builds are also unusual that you won't set a fixed completion date at the point of exchange, it will float until the builder is ready. Try and find a solicitor who has dealt with a new build before as they are a little bit more complex, especially when it comes to the infrastructure like sewers and roads being adopted.

I bought off plan the first time and watched it being built but kept track of their progress. This time round I've bought a completed property so no worries about it not being completed.

I saw the developers financial advisor, not so much for advise just so they could verify I was proceedable. The advisor will at least be able to explain the process to you which I think you'll find helpful. Also note that you'll need a larger deposit, 20% unless your using one of their schemes like newbuy.

JPB123

sirmosh wrote: »

Couldn't agree more, I'm always weary of sharing my finances with people connected to the sale in some way too since they'll know what you can afford and may try to push a harder bargain.

Not jumping to conclusions there at all are you? I have contracts with most of the major builders and my advice is always based on what is best for the client.

I'm offer both an independant or WOM service. On a number of occasions, I've managed to convince the builder to reduce the price for the client. We're not all mass-market EA advisors ala Connells, etc.

I am an Independent Mortgage Adviser

You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.