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Really basic question about deposit for new build (or any home for that matter)
sturgeon
Posts: 396 Forumite
I have a basic question, mainly related to new builds. My first property was a flat about 8 years ago, and due to some economic crisis style first time buyer initiative, I paid a measly £250 (no zero's missed) deposit in London for a new build flat. Thankfully it grew in value significantly and when I sold it, it gave my my deposit for another new build flat.
However, when I initially reserved the new flat they required a 5% deposit within 3 months, whereas completion would be about a year. Whilst I had more than 5% available, the money was tied up in my property so I took a loan out to pay back when I sold my flat in order to put down the 5%. This wasn't ideal and if the loan wasn't accepted, or was larger then this could not be an option in the future.
Let's say I found another new build property in a year's time. Last time round due to a delay I had to move into rented but let's assume I convince my buyer to wait until my new build flat is ready to move into until we complete.
How on earth do I put down the 5%/10% deposit required by the developer at least a year or so before completion. If I exchanged on my own flat can I use the buyer's deposit? Although finding someone to exchange and then wait 1 year + to complete seems very unlikely.
Basically, for 'normal' buyers (not investors who have vast money in the bank to put down these deposits), how are you expected/supposed to put down this big deposit without selling your home and moving out? Whilst I found a way this time through the form of a loan, surely there's a better way? Or are all buyers of new builds who aren't first time buyers all sold up living in rental waiting for a nice new development to pop up to then wait 1-2 years for completion??
However, when I initially reserved the new flat they required a 5% deposit within 3 months, whereas completion would be about a year. Whilst I had more than 5% available, the money was tied up in my property so I took a loan out to pay back when I sold my flat in order to put down the 5%. This wasn't ideal and if the loan wasn't accepted, or was larger then this could not be an option in the future.
Let's say I found another new build property in a year's time. Last time round due to a delay I had to move into rented but let's assume I convince my buyer to wait until my new build flat is ready to move into until we complete.
How on earth do I put down the 5%/10% deposit required by the developer at least a year or so before completion. If I exchanged on my own flat can I use the buyer's deposit? Although finding someone to exchange and then wait 1 year + to complete seems very unlikely.
Basically, for 'normal' buyers (not investors who have vast money in the bank to put down these deposits), how are you expected/supposed to put down this big deposit without selling your home and moving out? Whilst I found a way this time through the form of a loan, surely there's a better way? Or are all buyers of new builds who aren't first time buyers all sold up living in rental waiting for a nice new development to pop up to then wait 1-2 years for completion??
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Comments
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If I exchanged on my own flat can I use the buyer's deposit?
Yes - that's what you do. It's the standard way of selling/buying.Although finding someone to exchange and then wait 1 year + to complete seems very unlikely.
But it's super risky to exchange contracts to buy the new build, in advance of exchanging contracts to sell your current place...
- What if you can't find a buyer?
- What if you find a buyer, but they drop out at the last minute?
- What if property prices tumble, and you can't get enough cash from your current place to buy the new build?
If any of the above happen, you wouldn't be able to complete on the new-build, and the developer might sue you for mega-bucks.0 -
Some developers are quite happy to negotiate on when you pay the deposit. If you tell them that you can't release the deposit funds h Tom completion then they will take that into consideration. I've known that in the past some buyers don't pay the deposit until they complete. You will still have to pay the reservation fee and exchange within 28 days0
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