Help to buy new build- exchange contracts 9 months before completion

ameliaroseob

Hi,

Myself and my partner are trying to purchase our first home using the help to buy London equity scheme. The Bellway property is £350,000 and we have saved £20,000 and will using the 40% equity loan from the government. We both have stable jobs and earn enough to afford mortgage payments. We have also been approved for affordability by the New Homes Group.

We have chosen a specific plot and have just been told that it is now available on help to buy, with the invitation to reserve the property this week. However this is where i am confused.

Once we reserve the property we will need to exchange contracts within 28 days- which will be 3rd September 2016. We will therefore need to have our mortgage and help to buy equity loan in place by then. However, the property will not be completed until June 2017- 9 months away. As far as I am aware the help to buy offer expires within 3 months, and most mortgage offers expire within 6 months.

So will we have to reply for both closer to june? and is this a big risk to take as we can not be certain we will be approved closer to June.

We are very keen on the property as it is in our ideal location and price range. But we don't want to make a big mistake in handing over our £20,000 deposit if we can not be certain of obtaining a mortgage. Im sure many new buyers buy off- plan and so will be in the same situation as us.

Any help will be appreciated as the bellway staff are asking we reserve property asap before someone else purchases it

Many thanks in advance,
Amelia

amnblog

If you are working with a Broker experienced in the new build market, they are used to handling this type of scenario which is not unusual.

Certain lenders are geared up for long lead ins, others are not. An experienced head is therefore invaluable.

kingstreet

This is normal for newbuild.

On HTB the ATP lasts three months and completion must be six months from then, but the HTB Agents do give some latitude and will allow completion to be later.

Some lenders have longer mortgage offers and will allow easy extensions with a product change and valuation refresh after six months.

If you use a lender like Nationwide, you get only a two week extension and would then have to reapply so they are best avoided.

If you cannot cope with this, you would be better off staying away from newbuild off-plan as this is how it works.

ameliaroseob

amnblog wrote: »

If you are working with a Broker experienced in the new build market, they are used to handling this type of scenario which is not unusual.

Certain lenders are geared up for long lead ins, others are not. An experienced head is therefore invaluable.

Thankyou
We have been using the New Home Group which obviously specialises in new builds, however they are recommended by bellway and may be affiliated. We are therefore not sure how much we can trust their 'independent' advice

ameliaroseob

kingstreet wrote: »

This is normal for newbuild.

On HTB the ATP lasts three months and completion must be six months from then, but the HTB Agents do give some latitude and will allow completion to be later.

Some lenders have longer mortgage offers and will allow easy extensions with a product change and valuation refresh after six months.

If you use a lender like Nationwide, you get only a two week extension and would then have to reapply so they are best avoided.

If you cannot cope with this, you would be better off staying away from newbuild off-plan as this is how it works.

Thank you. We feel we have to buy new build off-plan as in this area, (the outskirts of west london), properties are in short supply.

So just to clarify, there is a total of 9 months in which the build must be completed? and is it common to request a long completion in order to allow the offer to be valid until after june? many thanks

kingstreet

The period between the issue of the Authority To Proceed and Completion can be upto nine months, but as stated the HTB Agents will permit a longer period than six months between exchange and completion.

Completion is "on notice" which means you exchange contracts without a completion date being known. Once the property is built, the builder's solicitor gives your solicitor two weeks notice to complete.

You need to ensure your broker is recommending a lender with long product draw-down deadlines where a product change and re-offer are a simple process where you won't have to reapply.

poppy1010

We had this exact scenario.

We put a holding deposit on our new build in Oct 2015, then exchanged contracts in Jan 2016 and paid deposit 5% which we got down from 10% (it was supposed to be within 28 days but the delay was due to the developers legal team being rubbish and not sending over all the stuff to our solicitor so we got it extended!). Our completion is 'supposed' to be next month, so September 2016 (although by the way the house is currently looking no chance!!!).

We used the new builds recommended broker. Although we did try and use our own broker but he bodged it up (as he didn't tell us he wasn't on the new build panel, which apparently he should have known about. This resulted in extra credit check and a waste of time). Anyway, their recommended mortgage bloke was fine (although slow - but hey it's free so hey ho). Our mortgage offer run out but we got it re-issued (took one day and the new offer was 9 months so amazing).

One thing to watch out for: they told us completion would 'likely' be summer (indicated June during the sales side of things). But as soon as we'd exchanged they then said September.

A tip for you; they will try and persuade you to use THEIR solicitor. Saying things like 'they know the lengthy contracts already' and it's 'cheaper' (which it will be). Our developers recommended solicitor did the legal stuff for over 85% of the properties! My partner was adamant that we were to use our own. As the developers solicitor wouldn't really be working for us. It cost us more money but he found A LOT which would not have been pointed out if we had used their one! he found some issues too, which he got resolved. They won't like you using your own solicitor, but just think why that is ;-) It is up to you who you use.

I don't know anything about the HTB so can't help with that. Just have a think about the costs of that though. We did and my partner, who is a Financial Analyst, thinks that scheme is financial craziness.