New build - long time between exchange & completion

on_a_sixpence

Hi all,

We have today put a deposit down on our (hopefully) forever home :beer: however there are a couple of things I was curious about:

We have been told that the builder requires exchange of contracts within 8 weeks of the official "release date" (in this case, mid Jan, so exchange by mid-Mar) however the build is not due to be complete until July.

Is it normal with many builders for there to be 4 months between exchange and completion? To me it seems an incredibly long time, and lots that could possibly go wrong in that time (further credit checks, change in lending criteria etc). That is their policy however and the only way round it is to not put a deposit down until later (though it will likely sell to someone else in the meantime!!).

Also, we having to save a total of £30k to cover deposit, stamp duty, fees etc, however by the end of March we will probably only have £25k max, including equity in our current house. Obviously lenders need to see proof that we can afford to buy, but will they understand (and accept) that another 2-3 months savings would be required after exchange of contracts given the timescales involved? Or would they want to see funds readily available (cash & equity) at the time the offer is made?

Thanks

andyf1980

Congratulations on the new house!

Yes it is normal for there to be a long time between exchange and completion on new builds. We are buying one too. It is well worth going through a broker with experience of new builds. I originally went direct to Nationwide but their mortgage offers are only valid for 6 months and then you have to apply again. There are a few providers who are more flexible; broker will advise you.

We were asked for proof of all of our deposit prior to exchange.

csgohan4

Lenders go on the now not if in the future. So you if you only have 25K deposit, they will go on that at the time of applications.


however do you have that 25k deposit as you said only until March you will have this?

on_a_sixpence

andyf1980 wrote: »

Congratulations on the new house!

Yes it is normal for there to be a long time between exchange and completion on new builds. We are buying one too. It is well worth going through a broker with experience of new builds. I originally went direct to Nationwide but their mortgage offers are only valid for 6 months and then you have to apply again. There are a few providers who are more flexible; broker will advise you.

We were asked for proof of all of our deposit prior to exchange.

I know in non-new build exchanges there is usually a clause in there around failure to exchange (which is what I'm most concerned about) where ~10% penalty is charged i.e. loss of deposit. So much can change e.g. lending criteria, delayed completion in 4 months. Do builders usually have contracts that are any different to this, or would it be the same generally? And does anyone think we would be held to such a penalty by a developer where there has been a mortgage withdrawal or other issue that means completion is not possible?

csgohan4 wrote: »

Lenders go on the now not if in the future. So you if you only have 25K deposit, they will go on that at the time of applications.


however do you have that 25k deposit as you said only until March you will have this?

The deposit is £20k, plus stamp duty and fees takes it to £30k total outlay to buy the house. We would have £25k cash at the time of exchange in March, which is obviously more than the deposit, but not enough to cover stamp duty or other fees. Would the lender need proof of cash for the lot, or would they only care about the cash coming to them i.e. the £20k?

Lloyd90

I'm confused. Why are you buying if your £5,000 short on the fees ? It's not exactly a small sum that your going to find down the back of the sofa or something is it ?

csgohan4

SO basically OP you do not have 25K only 20k when you apply for a mortgage.


Don't work on the if, work on the now

andyf1980

No, a new build contract is much the same as a standard contract. There should be a longstop date which allows the purchaser to withdraw without penalty if the builder doesn't complete the property by this date. I think ours is 6 months from estimated completion date.

Yes you're right about the mortgage. Ours is valid for 6 months from application but can be extended for another 6 subject to circumstances. It's a risk for sure.

As I said before, speak to a good broker with knowledge of new builds; they will really help minimise the stress!

on_a_sixpence

Lloyd90 wrote: »

I'm confused. Why are you buying if your £5,000 short on the fees ? It's not exactly a small sum that your going to find down the back of the sofa or something is it ?

csgohan4 wrote: »

SO basically OP you do not have 25K only 20k when you apply for a mortgage.


Don't work on the if, work on the now

We're in a fortunate position that we have nearly £3k disposable income per month (we have good jobs and are very careful with our money), so by us having £25k by March we will be able to comfortably save the remainder over the following 4 months. It's just a timing issue... one of those situations where we wish it was 6 months further down the line!!

The reason we want to go for it now is that this is literally our dream house. It's not a mansion, but it's everything we want; location, layout, garden etc. It's taken 2 years of looking to find this house... our financial situation is pretty good, so I'm just hoping that we can get the finances together in time for this particular plot

on_a_sixpence

andyf1980 wrote: »

No, a new build contract is much the same as a standard contract. There should be a longstop date which allows the purchaser to withdraw without penalty if the builder doesn't complete the property by this date. I think ours is 6 months from estimated completion date.

Yes you're right about the mortgage. Ours is valid for 6 months from application but can be extended for another 6 subject to circumstances. It's a risk for sure.

As I said before, speak to a good broker with knowledge of new builds; they will really help minimise the stress!

Thank you very much for your help Andy

greyroofer

We are in the same position. We've found our dream location and there are about 5 houses that we really want but we don't have the deposit until April as it's £27k. Moo!!

Just a waiting game now to see if they are all snapped up.

AnotherJoe

greyroofer wrote: »

We are in the same position. We've found our dream location and there are about 5 houses that we really want but we don't have the deposit until April as it's £27k. Moo!!

Just a waiting game now to see if they are all snapped up.

Ask them if they will acceot a lower deposit. 10% isn't a legal requirement it's just common practice but it can be negotiated, I've done 5% before and also accepted 5%