the lunacy of buying off plan

zarf2007

so a well know london developer I was considering buying a property from (BTL, buy price £360,000, 25% deposit) is insisting that we exchange contracts within 28 days.

Now this would be ordinarily ok but as the completion is not until December they are insisting I pay the 10% deposit and exchange within that time without having a mortgage offer in place (Broker says any full application we do now would only be valid for six months so we would need to reapply, he is therefore recommending we apply in a couple of months time so that we would be ok).

He also tells me others who are buying in the development are exchanging without a mortgage offer and stand to lose their deposit (30K+) if they cant secure one after the event.

I find this whole situation a joke, when are lenders going to be reasonable and make mortgage offers last 9-12 months? The developers have no incentive to change, either way they get a nice fat deposit from people who cannot proceed and can sell the property onto the next mug in this market!!

TBH my credit file is fine but I really dont want to risk doing this even though the broker says 'it'll be ok', its not his money we are putting on the roulette table.

on a serious note, has the MMR regulations affected BTL at all? I realise BTL mortgages are unregulated but have heard that lenders doing both residential and BTL are likely to be more stringent with their BTL lending as overspill from the MMR on residential mortgages.

lucie_1985

Berkeley homes perchance?

betmunch

When are the LENDERS going to be reasonable?

Thats a joke right?

Anything could happen to your income or credit file in 12 months, 6 months is plenty.

When are the DEVELOPERS going to start being reasonable would be my question!

lucie_1985

The developers don't need to be reasonable, presumably demand exceeds supply so they can set their own terms and the price to be paid now is much lower than it would be when the flat is completed.

zarf2007

betmunch wrote: »

When are the LENDERS going to be reasonable?

Thats a joke right?

Anything could happen to your income or credit file in 12 months, 6 months is plenty.

When are the DEVELOPERS going to start being reasonable would be my question!

but what if after 6 months when you settled in the property you lose your job? it still doesnt leave you in a better position does it? My point being circumstances can change at anytime. I realise that things were too easy years ago with getting a mortgage but it is at stupid levels of difficulty now, down to scrutinising where i get my haircut......I really can understand FTBs saying screw it, whats the point.

betmunch

But with that logic neither do the lenders.

Either way, whos at risk? The consumer.

Also either way, when does the builder get paid? On completion. Theres no need for such a long time between exchange and completion

zarf2007

lucie_1985 wrote: »

The developers don't need to be reasonable, presumably demand exceeds supply so they can set their own terms and the price to be paid now is much lower than it would be when the flat is completed.

exactly, and your not far off

betmunch

The developer is putting you in a position where you could lose thousands of pounds and you seem to be able to blame this on the mortgage lenders.

Im normally the last to stick up for them as I have seen numerous occassions when they have made illogical decisions, but offers are valid for a set time and this is known by both the buyer and the developer.

lucie_1985

I'm no expert (at all!) but given that it's buy to let wouldn't the affordability be based on the rental income achievable rather than your own income and outgoings?

betmunch

You would likely need a minimum earnt income depending on the lender.

Theres still the credit aspect to be aware of too.

I think we're talking in general terms, I certainly am.

lucie_1985

As I understand it, the developer wants an early exchange for cashflow purposes, leaving it any later/closer to completion of the building risks a price rise for the above buyer and no guarantee of being the buyer at all - there's no reason for the developer to honour any agreement to sell it to him without exchange.


We bought under similar circumstances 2 years ago, it was hideously stressful but in those two years we have seen a 75% price rise.