New build mortgage on exchange and completion

richy4

Placed a reservation deposit down for new build 2 bed flat this morning, £1000.

The developer wants exchange of contracts within 28 days and 10% deposit at this time.

However, the actual property does not have an expected completion date till next Autumn!!

Due to such a lengthy delay between exchange of contracts and actual completion, I wanted to ask whether I can use this time to my advantage by continuing to mount up an even bigger deposit for a mortgage up until I finally reach completion next year?

Is it possible to accept and present a mortgage offer to the developer at exchange of contracts, only to change the mortgage and amount of deposit later on next year - with a higher deposit, lower mortgage value?

kingstreet

Yes. Nothing wrong with that.

dgtazzman

With that long till completion, any mortgage offer secured now will have expired anyway. I would try to get the developer to include a clause in the contract that states you won't be liable for anything if you are unable to secure a mortgage when the time comes.

Mine agreed to this, be it reluctantly, but you never know how the mortgage market will change.

davidmcn

They won't care (or even know) as long as you somehow scrape together the right amount of money in time for completion.

richy4

Thanks for your replies guys, really helpful.

So just to clarify, is there any need for me to get a mortgage AIP for the exchange of contracts stage or will the developer literally just want to exchange and have their 10% deposit, leaving me free to decide upon a mortgage product much closer to the time of completion and therefore avoid paying any unnecessary valuation/product fees for a mortgage that would just expire anyway?

kingstreet

You'll need a full mortgage offer, otherwise your solicitor should not be willing to exchange contracts. In fact many will rightly refuse to exchange when the build end is beyond the mortgage offer expiry date.

There are lenders charging no valuation fee, if that is your issue. You will then be able to reapply when the build-end is within six months.

Otherwise there are lenders happy for you to change products and who will keep your application alive until the property is finalised.

As an example, one of our builders had issues and we have gone from an application on 31 December 2015 which was first offered on 27 January 2016. The drawdown deadline was 30 September 2016. We have had the valuation refreshed when it got to six months old (free) and have selected another product with a drawdown deadline of 30 June 2017. We've actually covered an 18 month build timetable and have paid only one valuation fee and one product fee. Fortunately, the second product was actually better than the first as well...

andyf1980

Worth being careful about which lender you go with. We looked at Nationwide but if it went beyond 6 months you had to make a whole new application. Halifax or Skipton were a couple we looked at. Good broker is valuable.