New builds and mortgages questions

ShouldntBeSoComplicated

Hi all,

I'm currently in the process of looking for my first place to buy and I've been somewhat interested in new builds, however there are some things that I can't quite get my head around.

First of all, pretty much all new builds have a reservation period of 4 weeks within which contracts should be exchanged. That also means getting a mortgage approved. Considering that mortgages seem to take longer than that to get approved (or at least from what I'm reading; 6-8 weeks). Does that mean I should have a mortgage arranged in advance? What if the new build ends up being cheaper or more expensive than the mortgage that I have had accepted in advance? Am I going to be loosing some money (booking fee/something else?) if I don't find a place and the mortgage offer expires?

Secondly, perhaps not fully related to this forum section; I'm looking at the lower end since I only have savings for a deposit and a monthly income, and it's nowhere enough to go for the mid/high end of the market. Many of the more affordable new builds are reserved before they even release the dimensions of the plot and/or even open a show apartment! Is this all being reserved by people who are just buying them for investment with a lump of cash? What person/family that would like to make the place their home throws (an obscene amount of) money without even knowing what it's going to be like?!

I feel like I'm in a position where I'm a totally uncompetitive dead fish in the new builds market, and the only option really are sales of previously inhabited places where you have to go through the entire offer/mortgage/contract/etc process. Any insight would be really helpful to me.

Thank you in advance for any responses.

kingstreet

You enquire about a property, then get a mortgage agreed in principle.

You then reserve the property, solicitors are instructed and apply for the mortgage. You have twenty-eight days in which to get to a mortgage offer and be able to exchange contracts.

We are newbuild specialists and we are having no problems achieving that. In addition, our builders are aware it is taking longer and are not penalising purchasers if the deadline is missed.

kitty_kins

Hi

We are buying a new build and this is how it's been going for us

Saw the house we liked in March. In our opinion, it's the nicest one available on the development in our price bracket. We phoned the estate agent who are selling the development and explained we are FTBs and we were interested but not sure if we could afford. She set up a meeting for us to go in and see her and also gave our details to a financial advisor/broker who could assess affordability for us and would handle an application for us if we wanted to.

He confirmed that with the Government equity help to buy scheme, we could afford the house for only £25/month more than we pay in rent at the moment. Result! So, in March we paid our reservation fee.

Mortgage Application was submitted in April and valuation done straight away. Mistake was made by the bank so valuation form needed to be amended. This took them a month. (Why?!)

Mid May this was sorted and our application actually went to offer. We received our offer last week (finally!) and we have transferred the money to the solicitors this week for deposit & fees so are hopefully exchanging today/Monday.

Either way, the builders/EA/Halifax have all been very understanding throughout the process even though it has gone WELL over 28 days because this was due to circumstances beyond our control.

It's still very stressful of course, but still seems to have run smoother for us than for my brother who is currently buying his first home (pre-owned) and keeps getting gazumped/seller changes mind about selling/anything that could go wrong does!!

Hope this helps a little bit at least xxx

ML420cdi

And to those who have succeeded in getting a mortgage offer, how long is that valid for?...taking into account it could be a 6months or 12 months until 'your' house is ready to move into?

kingstreet

Usually six months, but depends on lender.

kitty_kins

Ours was issued in May, valid until November so 6 months for us (with Halifax)

ML420cdi

But what if it takes longer than that to build the property?....we are waiting for a Barratt phase 2 to be announced and like others will have to put down £500 to reserve and then 28 days later to exchange and not one brick on the 2nd phase will have been laid by day 28. The style of house we want on the phase might not even start construction until next year....but such is the demand and panic to buy you are being expected to 'exchange' potentially more than a year before moving in!...so presumably after 6 months you have to go through the re-application process all over again?

kingstreet

kitty_kins wrote: »

Ours was issued in May, valid until November so 6 months for us (with Halifax)

Halifax offers don't have a fixed offer period. They have a product drawdown deadline.

The current products have a deadline of 28 February 2015.

Your November expiry was applicable on products available from March/April. Other recent match-ups;-

January 14 - August 14

June 14 - February 15

March 14 - November 14.

FWIW, you can alter the product quite easily with Halifax if you approach the drawdown deadline, you can amend the product and have them do an internal refresh of the valuation.

Very useful on newbuild.

ShouldntBeSoComplicated

Thanks for the replies, so it seems like if I want to go for a new build I really need to look ahead and as soon as I like something get a mortgage agreed in principle and then hope things will hold out. Also looks like agents/developers may be a bit lenient when it comes to the 28 days reservation period?

Thrugelmir

ShouldntBeSoComplicated wrote: »

Also looks like agents/developers may be a bit lenient when it comes to the 28 days reservation period?

A question of weeding out time wasters from a developers point of view. Once contracts are exchanged then work can be scheduled / started on that particular property in earnest.

ethank

ML420cdi wrote: »

we are waiting for a Barratt phase 2 to be announced and like others will have to put down £500 to reserve and then 28 days later to exchange and not one brick on the 2nd phase will have been laid by day 28. The style of house we want on the phase might not even start construction until next year....but such is the demand and panic to buy you are being expected to 'exchange' potentially more than a year before moving in!...so presumably after 6 months you have to go through the re-application process all over again?

It is a big risk to exchange without a mortgage offer in place that will be valid at the time of completion. If you don't get the mortgage on the second time round, you will still be liable to pay the deposit.