How to reduce the risk of buying off-plan?

drc90

We're currently looking at a few developments nearby which all have completions "roughly six months after release", subject to delays.

With most mortgage offers only being valid for six months, how do people reduce the risk of the build taking more than six months (likely), and having to apply for another mortgage and having the offer reduced (possible)?

Do we need to find a lender who will hold an offer for, say, 12 months from the offset?

David_White

It's not unheard of for a new build property to be finished after it's deadline... it happened to me last year in fact.

Most lenders are flexible when it comes to extending a mortgage offer.

drc90

I thought most lenders are actually quite strict, e.g. can only extend for an extra two weeks or something like that.

And then if the offer does expire, and you have to apply again, you risk the offer being lower or the valuation on the house not matching what you've agreed to pay the developers?

MaebyJade

We are buying off plan, with completion date being June 2016. When we got our offer from Halifax it states that the offer is valid until September 2016!

Haylescom

Our Halifax mortgage for a new build is also offered until September 2016 and that was offered in December.

Dysnomia

Oh boy, been there!


I originally reserved my flat in August 2014, with completion estimated at the end of April 2015. I did all the right things, waited until January 2015 to apply for my mortgage with Woolwich etc etc. Got accepted in February, and even signed the paperwork ready for exchange.


Then there was an issue with the electrics for the whole estate, and completion was pushed back to August. No problem, I thought, I had plenty of time left on my mortgage offer, even if it would be a bit tight.


Then the completion date got pushed back again and I found my mortgage offer would expire before the flat was ready. I still hadn't exchanged because the developers were unwilling to give a firm completion date, so I wasn't entitled to any help with costs for getting a new mortgage. Woolwich were unwilling to extend and even reluctantly would only do so for 28 days.


By this point the flat was now worth approx. 10k more than I had reserved it for, so the developers were more than happy to release me from the reservation agreement if I was unhappy. But I was pretty much at the limit of my affordability so would have been priced out of the area if I had done this. So, I decided to stick with it and get a new mortgage offer from Nationwide. This took quite a while as the banks really don't like you having multiple mortgage offers.


I was able to get the same mortgage amount as my salary was the same, but it was a bit hairy waiting for the survey report. Weirdly, they offered me a better rate (2.29% on a 2-year fix compared to 3.19%) and I got £500 cashback so I am actually better off to the tune of £40 a month now.


A new date for exchange was set for October, so I handed in my notice at my rented place. Then there was an issue with the paperwork between the freeholder and the developer and I was unable to exchange, let alone complete.


I finally moved in in November, having had to move back in with my parents for 3 weeks and put everything into storage. Exchanged, completed and moved in all on one day in the end.


Altogether the delays have probably cost me around a grand in mortgage fees, surveys, and increased commuting 200 miles one way for work (not including all that rent I wouldn't have had to pay) even factoring the better mortgage deal I got. It's a great flat and I'm really happy here now, but I wouldn't go through all that again!


Dys.

drc90

Thanks for your replies. You've touched on something that I hadn't really considered before - when to apply for the mortgage. I was under the impression I should do it as soon as possible after reserving the house, but should I wait instead?

David_White

I had to exchange contracts within 28 days of reserving a plot.

I believe most (if not all) developers work on this basis.

Mummyto4kids

We have bought off plan, reserved in November, mortgage was offered by Halifax a couple of weeks after reservation and its valid until the end of June 2016 - our original completion should have been the 1st week of March, its now anticipated to be the end of May but our broker and solicitor both know when the offer expires and the developer has said we will definitely complete in time for our mortgage offer not to lapse.

Verix

I would discuss your fears with your broker. They will know which lenders are good when it comes to extending offers and which ones to avoid. Some lenders will have an offer for 6 months and allow to extend it for another 6 without any problems.

You will generally need to apply for you mortgage asap after reserving as you need the offer at exchange of contracts which is typically 28 days later.

Hope it goes well.

kingstreet

Mummyto4kids wrote: »

We have bought off plan, reserved in November, mortgage was offered by Halifax a couple of weeks after reservation and its valid until the end of June 2016 - our original completion should have been the 1st week of March, its now anticipated to be the end of May but our broker and solicitor both know when the offer expires and the developer has said we will definitely complete in time for our mortgage offer not to lapse.

Your offer wouldn't lapse.

You simply pick a new product and Halifax has Colleys refresh the valuation after six months.