Help please - Clueless!!

Ld2602

Hi there

I'm a newbie, please be kind :j

My hubs and I are viewing a new build show home on Saturday morning, very interested in purchasing a house (plot) within this development. We're not sure what the timescale is for this particular plot to be built on (nowhere near ready to build). We're aware that a deposit of £250 needs to be put down to reserve but this is the part that confuses me...

"If you do not have a property to sell, a reservation fee of £250 is required. We then ask that your solicitor concludes missives within 14 days from the date of reservation upon conclusion of which, a deposit of £2,000 is required within 7 days. This reservation fee and deposit will be deducted from the price of your property at settlement."

We are first time buyers and I am currently working towards attaining a full-time position to enable us to gain a mortgage using the mi new home scheme (we're in Scotland). But it won't be in the timescale they would need the missives. We have the £2000 needed but no clue about missives etc??

I may be being daft here, but does this mean we would need to have some sort of mortgage in place in the next few weeks? Even if it looks to be another year before the house was released to us??

I'm confused with all this jargon :(

Please help!! I don't want to get myself all excited for nothing!

hcb42

Yes I would think you would, as you are committing to buy, although mortgage offers wont last 12 months either.

Everything is negotiable of course..

Ld2602

Wow thanks for the quick response! I suppose I can ask all these questions on Saturday. I feel like a dog with a bone already! So it looks to be that they would need something in writing to say we can afford the house? Even if our circumstances may significantly change financially within the timeframe from now to getting built?

bitsandpieces

You should discuss buying this way with your solicitor, but tying myself in to buying a house off-plan when not currently in a position to buy is something that would have me losing sleep (even if I were 'allowed' to do this)! I'm on a temp employment contract, and still wouldn't consider doing this in case my circumstances changed before I had to complete. What if you don't get the FT job, or get a great new job elsewhere?

Is there a shortage of properties in the area? Waiting until you're in a position to buy and then buying a property that's already (or, at least, very nearly) built has real advantages!

Ld2602

Hi there

I know you are right and there are real risks.

I have chosen to work part-time and there is a full-time contract available at the moment. I understand that it is a very very big gamble.

Argh house buying is so frustrating, patience is not a virtue of mine! It's such a minefield out there. There are very little houses on the market here within our budget if I am to continue working part-time. This is why we would like to take advantage of the 5% deposit scheme on a new build (plus they are gorgeous houses!) And I will go back to full-time working. I just don't want this opportunity to slip through our fingers, there is only 12 of the style we would like going up.

I'm just confused as do mortgage in principles not run out? And it may be months until we need to release funds?

Morale is running low! Ha!!

bitsandpieces

Ld2602 wrote: »

This is why we would like to take advantage of the 5% deposit scheme on a new build (plus they are gorgeous houses!) And I will go back to full-time working. I just don't want this opportunity to slip through our fingers, there is only 12 of the style we would like going up.

They're not built yet, are they? The plans might look great, but I wouldn't assume the finish will be good until they're built!

You're right - mortgages in principle generally have a time limit (and there are also potential issues if the property value falls between missives and completion). You'll need to speak to a good mortgage advisor and/or solicitor to see if you have a chance of buying at this stage and - if so - what the risks are (I wouldn't use an advisor/sol suggested by the builders).

Are properties in such short supply around you or prices going up fast? You're assuming that all the plots will sell out and that you won't be able to find something as good when you are in a position to buy more 'normally', and you seem to be planning to take very big risks as a result...

Ld2602

Not built yet, but the 3 within our price range sold very quickly as soon as the plots were released. We are going to hopefully use the Mi New Home scheme with a 5% deposit so there are limited properties available in our price range.

There are only 3 developers in our area that accept the 5% deposit scheme so that really limits us. The others have yet to release any more plots.

I think I may just be jumping the gun a little with my fantasies! Thank you for your help though! I will enquire on Saturday morning and hopefully we will b in a better position when the new phase is released and fingers crossed they don't get snapped up.

bitsandpieces

Ld2602 wrote: »

Not built yet, but the 3 within our price range sold very quickly as soon as the plots were released. We are going to hopefully use the Mi New Home scheme with a 5% deposit so there are limited properties available in our price range.

There are only 3 developers in our area that accept the 5% deposit scheme so that really limits us. The others have yet to release any more plots.

What price range are you looking in? Even on a £250,000 house a reduction of 5% in the deposit needed just means you need £12,500 less deposit money. Which isn't peanuts! But if looking on the scheme is limiting you to buying new (generally paying a premium) from a small range of sellers (which may mean you pay more of a premium - as others looking to use the scheme will also be seeking properties from these sellers) it may be less of a good deal than it seems. This 5% extra on the mortgage will still need paying back. Buying off-plan can work well for those who can afford to speculate (the property may be worth more by completion, but equally prices can fall) but I'd be worried if I was stretched for deposit anyway...

If you're planning to return to FT work anyway, can you save all or most of the extra salary when you do so? This should give you a bigger deposit within a year or two (or much sooner, depending on income and house prices) so you could buy without needing an assistance scheme.

If you're impatient, remember that owning a plot of land that will have a house built on it one day isn't going to improve your lifestyle If anything, the financial commitment could worsen it. Depending how fast the houses are built, it may or may not be a quicker way to get a house than working to save a bigger deposit and buying on the open market. If you are considering buying off plan, make sure to get clarity from your solicitor about when the builders are committed to having the property ready for completion/move-in (building has been delayed on some sites).

Ld2602

The 3-bed semi's are going for £134,500. The next leap up is £185,000. We have our deposit saved already, we just need to sort out a full-time position for myself so we can guarantee a mortgage for a higher amount.

It's all just a waiting game really, in the meantime we are just going to keep saving what we can. And not take any risks, I have done some research and another developer is releasing the next phase in Spring 2014, so this is maybe better for us? I will just have to be patient!! Very hard when your back living at home with the folks after living away for 6 years!! :mad: There's plenty of space, but I cannot wait to have a house to myself again lol!!

I think I have my heart set on a new build 'forever' home for the 3 of us, I don't think I will manage o change my mind about it atall now When I know it's in reach

bitsandpieces

Fair enough if you want a new-build property (if you are going to be there for the rest of your lives, buying at a premium may be less of an issue). Do you mean a 'new' new build, or would you be happy to buy secondhand? If the latter, also keep an eye out to see if any of these properties you've had your eye on come on the market once they're built - some people buy off-plan and then sell on soon after the place is built...

Might be worth a quick (free) chat with a mortgage advisor anyway, to see what would be helpful with you returning to FT work - it used to be that you needed to have been in a job for a certain length of time, though no idea about current situation. Another benefit of returning to FT work (if you can do this) would be that you could save faster and thus get a bigger deposit - giving you a choice of better mortgage deals and, unless there are other reasons for going with the MI scheme, the option of buying outside of the scheme.

princeofpounds

Don't commit yourself to anything if you have doubts on your ability to complete. Wave goodbye to your life savings...

Also, do not trust the sales staff of the builders. They will minimise the risks of the buying process to get a signature on paper.

Personally I don't think you are ready to be reserving anything at all at the moment.