Help to Buy Exchange of Contracts - buying off plan

Gene_Geney

Hi there,


My wife and I have just reserved a new build house off plan - it has an estimated completion date of July/August 2014. We've been told that contracts should be exchanged by 2 Feb but they did say there is some wriggle room there.


I am a little concerned about a couple of things and wonder if anyone can put my mind at rest please?


Firstly, any mortgage offer is likely to expire 6 months after being accepted. Even if we left acceptance of the offer right up to the last safe moment, that would still leave the offer expiring before completion. Any delays and we'd definitely need to get another offer. What happens if Help to Buy terminates prior to then and we couldn't get another Help to Buy mortgage?


Secondly, upon reading the Help to Buy rules from our agent (Homes in Hants - I can't post links!) I am confused about the 'Buying off plan' FAQ. It says that we can reserve a house at any time but mustn't exchange contracts before less than 3 months remain to completion. So, for us, that'd be Mar/Apr time. I can't see Persimmon agreeing to hold the house until then - but they must've known about this rule when we reserved? We did tell them we'd be using Help to Buy - they've even written it on the reservation form.


Any advice would be greatly received.

HardCoreProgrammer

1. This is really up to the policy of your lender, so I think it is best to talk to the lender when making the mortgage application.

2. Are you using the 1st (equity loan)/2nd (mortgage guarantee) phase of the Help to Buy scheme?

By the way, are you aware that banks can withdraw mortgage offers between exchange and completion, if your circumstances change (e.g. if you lose your job)? Consider keeping that period as short as possible.

Gene_Geney

Hi,

Thanks for your reply.

We'll be using the Help to Buy equity loan.

Of course we realise that a mortgage offer may be withdrawn if circumstances change. We're both in stable jobs and it's a risk I think is acceptable in our circumstances.

Gene

thequant

Gene_Geney wrote: »

Hi,


Of course we realise that a mortgage offer may be withdrawn if circumstances change. We're both in stable jobs and it's a risk I think is acceptable in our circumstances.

Gene

Erm that the last of your worries, if the mortgage is withdrawn you will still be forced to complete and without a mortagage you will be bankrupted in the process.


Been many high profile cases of this in the past few years.

Gene_Geney

thequant wrote: »

Erm that the last of your worries, if the mortgage is withdrawn you will still be forced to complete and without a mortagage you will be bankrupted in the process.


Been many high profile cases of this in the past few years.

I don't understand; how does anyone manage to buy off plot then?!

kingstreet

I think you've misinterpreted the HTB - EL rules.

From the point the ATP is issued, you have three months to exchange contracts. See page 8 of the buyer's guide;-

http://www.homesandcommunities.co.uk/sites/default/files/our-work/help_to_buy_buyers_guide_sept_2013.pdf

Your Local Help to Buy Agent’s ‘Authority to Proceed’ is valid for three months – the time limit for exchange of contracts. Typically, most house builders will be seeking buyers to exchange contracts within one month of making a reservation.

You then have six months to complete.

You should however synchronise the submission of your PIF/Res to the HomeBuy Agent and your mortgage application to your lender so completion will be within six months of the issue date of your mortgage offer, if indeed, your lender's offers last six months.

We currently have property which will not be completed until October and the PIF/Res and mortgage application submissions will not be happening until April.

MoneySaverLog

The new build builder will probably request exchange of contracts in 28 days from reservation. Did with me, taking me up to the 13th. The estimated completion is June.

DIP now agreed. Nationwide mortgage planned to go in on 2nd Jan as now have ATP Completion estimated for June. Mortgage offer will be valid for 6 months. Concerned what happens if completion is delayed with mortgage offer then?

Solicitor engaged in December, though not heard anything more from them yet. Assuming they are doing the required searches etc to meet exchange date but slightly concerned they have not requested the deposit money yet. Will have to chase that I think.

kingstreet

MoneySaverLog wrote: »

Concerned what happens if completion is delayed with mortgage offer then?

Nationwide will give a two week extention if the solicitor confirms completion will be within that timescale.

If not, it's a new application, new fees etc. You may wish to discuss this with the builder, if it happens.

You may also need a new ATP from the HCA HomeBuy Agent.

Gene_Geney

kingstreet wrote: »

I think you've misinterpreted the HTB - EL rules.

From the point the ATP is issued, you have three months to exchange contracts. See page 8 of the buyer's guide;-

Link Removed

Quite possible that I've misinterpreted the rules. But what about the first FAQ on page 17 of that guide? I think that's the bit that got my grey matter ticking over.

kingstreet wrote: »

You should however synchronise the submission of your PIF/Res to the HomeBuy Agent and your mortgage application to your lender so completion will be within six months of the issue date of your mortgage offer, if indeed, your lender's offers last six months.

We currently have property which will not be completed until October and the PIF/Res and mortgage application submissions will not be happening until April.

Thanks for your advice - I think that's exactly what I was looking for. The builder has estimated completion around the July/August mark so I need to be persuading them to not exchange contracts until around March/April time in order that my mortgage offer (that will hopefully last 6 months) will still be in place.


If they won't do that, then I guess I'll walk away. Seems like there's far too much risk otherwise. Like you said, after 6 months you might need another ATP which, if Help to Buy disappears for some reason, might not be possible. Then we'd be stuck in a contract and lots of pain.....

Gene_Geney

MoneySaverLog wrote: »

The new build builder will probably request exchange of contracts in 28 days from reservation. Did with me, taking me up to the 13th. The estimated completion is June.

DIP now agreed. Nationwide mortgage planned to go in on 2nd Jan as now have ATP Completion estimated for June. Mortgage offer will be valid for 6 months. Concerned what happens if completion is delayed with mortgage offer then?

Solicitor engaged in December, though not heard anything more from them yet. Assuming they are doing the required searches etc to meet exchange date but slightly concerned they have not requested the deposit money yet. Will have to chase that I think.

Seems like a similar situation to me. I'm going to try and get the exchange of contracts delayed and see where I go from there. If things go well at that point, I'm going to ask the solicitor to negotiate a long stop date for when the mortgage offer/ATP will expire. If they don't like that, no sale.

kingstreet

This?

Q Can I buy a home off plan?
Yes. You are able to reserve a new home off plan at any time. However, you cannot exchange contracts before three months to legal completion of the sale. You also need to ensure that your mortgage offer is valid through to legal completion.

TBH I've never come across that before and not only do we get the ATPs issued to us, we're also copied in on the ATEs and Sol Form 1s for time of completion. It's never come up.

If you have a query, call your local HCA HomeBuy Agent and ask them. We've always worked on the basis of exchange within 28 days and completion within six months of the issue of the ATP.

Most of what we do hasn't been built at the point of reservation.