New Builds -> Valuations

Trapdoor

The last three properties we have bought have all been new-build. One off plan. We made modest increases on the previous two, but were not in for more than 5 years. Our current property (one of three, non-estate with sea views) was new-build in 2001 and we paid £200k for it. After a peak before the housing market crashed, one of the neighbours sold at £425k. Current valuation is just shy of £400k.

We benefitted from having a brand new house, but not without faults that required remedy with involvement of NHBC (but then so did our last one) and some 12 years on have a huge amount of potential equity. We don't plan to move anytime before we retire, and will then downsize and release the equity (which hopefully will still be there).

There are some serious benefits in buying new, the main one for us was 10 years of worry free ownership, although that doesn't necessarily mean there won't be problems that require some serious kicking off about. Just that in theory, you won't be landed with a huge bill.

bclark

kingstreet wrote: »

Builder incentives of upto 5% of the purchase price are routinely accepted by most mortgage lenders without affecting the loan to value. It is where there's a 5% builder's deposit plus stamp duty and other bits on top where the problems start.

Out of interest with regards to the LTV if the house price is £400k for example and the builder is giving an incentive of £20k does this mean that the lender will treat the sale price as £400k or would it be £380k?

I am sort of in this position and although affordability is no problem if they were to treat the sale price as the higher figure then I could get a cheaper rate.

martinsurrey

One of my good friends bought a new build semi in 2010 for £400k (in the south east), they've just turned down an offer of £465k after 2 days on the market confidant they’ll get £490k.

It all depends on the local market, on the development and how hard you can negotiate your price.

They bought the last unit in the phase, just before the developers year end, so got a good deal, and the development is now finished so no more construction traffic, both which have helped them.

The local market has risen slightly, but nowhere near 25%.

In short, don’t generalise ‘new builds’ look at the details, and as no one here has any, any advice is starting on shaky ground.

bclark

With newbuilds you also have to factor in the money saved on all the other elements. Yes there is often a premium but that's because you often don't have to spend out on much else when you move in.

My new house is going to have carpets, floor tiles, dishwasher, light fittings, fridge/freezer, brand new kitchen and bathrooms etc. Buying a second hand house, even a relatively up to date one, will also have to be followed up by spending a lot of money on getting it how you want.

kingstreet

bclark wrote: »

Out of interest with regards to the LTV if the house price is £400k for example and the builder is giving an incentive of £20k does this mean that the lender will treat the sale price as £400k or would it be £380k?

Many lenders will allow a builder's contribution to the deposit of 5%, so if you were putting down £20k and they were gifting you £20k from the gross price of £400k, you'd be buying for £400k with a mortgage of £360k, or 90%.

kingstreet

bclark wrote: »

My new house is going to have carpets, floor tiles, dishwasher, light fittings, fridge/freezer, brand new kitchen and bathrooms etc. Buying a second hand house, even a relatively up to date one, will also have to be followed up by spending a lot of money on getting it how you want.

If all those things are mentioned on the CML Incentives form and are in addition to the builder's 5% contribution to the deposit, I can see the lender taking the 5% off the gross price as the incentives are too high.

bclark

kingstreet wrote: »

If all those things are mentioned on the CML Incentives form and are in addition to the builder's 5% contribution to the deposit, I can see the lender taking the 5% off the gross price as the incentives are too high.

They aren't tbf, the kitchen, bathrooms etc just come with the house.

Does the fact I have a 30% deposit make any different to how much they will worry about the builders incentive?

kingstreet

It makes no difference what your deposit might be.

They will take 5% maximum, if the CML form says more, they may reduce the valuation accordingly. Many will ignore a few incidentals, such as white goods, carpets and curtains but could have a problem with stamp duty and legal costs on top of the 5%.

Thinking about it, yours probably won't go on the CML form as they are pretty standard, non-cash incentives.

Speak to your developer. They will have experience of lender peculiarities.

bclark

kingstreet wrote: »

It makes no difference what your deposit might be.

They will take 5% maximum, if the CML form says more, they may reduce the valuation accordingly. Many will ignore a few incidentals, such as white goods, carpets and curtains but could have a problem with stamp duty and legal costs on top of the 5%.

Thinking about it, yours probably won't go on the CML form as they are pretty standard, non-cash incentives.

Speak to your developer. They will have experience of lender peculiarities.

Thanks Kingstreet, I really appreciate all of the advice you give out on here. I will speak to my lender, Nationwide, but its really useful to just get a bit of advice on here before picking up the phone to see how things should be.