Contractor + Help to Buy + CRL

london_htb_contractor

Hi all,

I'd like to buy a property using help to buy: the property price is £600,000, and i've applied for a the 40% equity loan, and have a broker. I'm a contractor working through my own limited company (100% share holding, active since Autumn 2015 with rates between 550 and 625/day, no gaps): the majority of my yearly income is paid by dividends, salary is a small percentage. The result is i'm applying for a help to buy mortgage of ~£330,000

He (the broker) found me a deal with Halifax: 1.9% fixed for 5 years, but when it came to fill in all the details, it turns out the warranty is CRL, which he says Halifax will not lend against... Am I screwed? The broker (he's been great) seems confident i'll get something, but he now is looking at lenders who go based on company year end accounts combined with my personal tax returns: which is obviously not favourable to me. What will the impact be when it comes to rates?

The developer/agent was very dismissive of my concerns regarding the warranty: she basically said "Other people have gotten mortgages with these lenders". My current contract only runs until September too (cheapskate client), so the broker said this might also be a problem for some of the contract lenders who do HTB.

I'm really annoyed at the whole situation too: surely it was well known CRL had underwriting issues when this warranty was tendered... I'm just thinking whether I should cancel my reservation and find another place or tell the broker to continue trying to find me an offer to make it work. But if they (the developers) were this careless selecting a toxic warranty, what else will they be careless about?

Apologies for the rambling nature of this post, any thoughts will be much appreciated, thanks for reading!

sal_III

One lender ho deals with HTB and contractors is Nationwide. Can't comment on their appetite for CRL warranty new builds. Most lenders want your contract to run for at least another 3 months on application, so you might have to wait for new contract or renewal.

I wouldn't trust a word coming out of the sales drones when it comes to mortgages etc. most of them are completely clueless. If they insist that other buyers managed to get mortgage with the CRL warranty - ask them which lenders then check with your MB if they are suitable for you.

CRL issues started this may (a little over 2 months ago) when their main insurer Alpha went bust. Most buildings take 1 year+ to complete and the warranty provider is usually chosen at the beginning. So not sure what you mean by "I'm really annoyed at the whole situation too: surely it was well known CRL had underwriting issues when this warranty was tendered.."

Again the developer where not careless by selecting CRL they didn't know there will be issues with them in the future, cheapskates - probably.

Personally I would steer away from CRL backed new build even if I can buy it now, the chances of the warranty to be void or unusable + the chances of being harder to sell are too great. I would only consider it if I'm dead set on an area and there is no other option. but will make sure to gauge the developer eyes for incentives and freebies as they are in hot water themselves over this.

SallyDucati

According to the CML handbook Nationwide won't lend on a CRL warranty underwritten by Alpha. It still states some will accept CRL but they may well catch on in time, and if it isn't replaced could cause issues selling on later. There has been another post on here about Halifax withdrawing offer due to CRL issue.

If others have managed to complete it is possibly due to timing and when mortgage companies catch on.

I am buying a new build that DID have a CRL/Alpha warranty. The developers have now gone to another broker and it should be sorted next week

The developers will find it VERY difficult to complete on any more properties without a warranty (which is the current situation) as at some point soon no lenders will approve mortgages. If the sales person is being dismissive I suggest they don't know the full details. Ask them what the developers are doing about it. If you don't want the hassle I would pull out and find somewhere else.

london_htb_contractor

Thanks for the replies: In the mean time I spoke to another broker too who is a contractor specialist: he said he called his contact at the lender and they will accept CRL. The original broker has also found another lender, though at a much worse rate... one of them is Nationwide so that's unusual about the handbook.

I've asked the salesperson who the underwriter on the warranty is too incase there's a chance it wasn't Alpha. If it is/was then I will likely pull out.

gauge the developer eyes for incentives and freebies as they are in hot water themselves over this.

I suspect I will get nowhere with this: the sales person is a robot and impossible to read, and I couldn't negotiate my way out of a paper bag.

SallyDucati

london_htb_contractor wrote: »

Thanks for the replies: In the mean time I spoke to another broker too who is a contractor specialist: he said he called his contact at the lender and they will accept CRL. The original broker has also found another lender, though at a much worse rate... one of them is Nationwide so that's unusual about the handbook.

I've asked the salesperson who the underwriter on the warranty is too incase there's a chance it wasn't Alpha. If it is/was then I will likely pull out.



I suspect I will get nowhere with this: the sales person is a robot and impossible to read, and I couldn't negotiate my way out of a paper bag.

Link to CML list - https://www.cml.org.uk/lenders-handbook/englandandwales/question-list/1913/

Nationwide says quite specifically -
- CRL new build 10 year structural defects insurance policy for residential property:
o New properties where Ark have underwritten the policy. Please see the final paragraph on the final certificate which will confirm Ark details. Acceptable.
o New build properties underwritten by Alpha. Not acceptable.
o Second hand properties being sold by first or subsequent owner and property is under two years old, with the warranty underwritten by Alpha. Unacceptable.
o Second hand properties over two years old. Acceptable.

So they may accept CRL but not underwritten by Alpha.

SallyDucati

I've just noticed the list still says Halifax will accept CRL, so they may not have updated the list yet and others may not have done either. So just because this says a provider will accept CRL doesn't definitively mean they will.