When is the deposit needed? Confused!

LittleMoo

We have our eye on a new build property that is due for completion (as in building will be ready) in September.

I understand that a reservation fee of £500 is paid first, followed by a deposit upon exchange of contracts. However, our 5% deposit (we'll be getting a Help to Buy loan for another 20%) is equity from our current home, so if the deposit is due before September, how can we pay it without selling our house and therefore being homeless? Or would the HTB loan be put in place before September and used as a deposit for this purpose?

We want to reserve asap as the house is perfect and the last one of its type on the site. Plus, it's currently at the brickwork stage, meaning we could choose all the finishes - perfect!

However, we haven't even put ours on the market yet and can't do until we've done some major clean-up work (long story short, Autistic hoarder daughter and husband has resulted in build up of clutter that may take weeks to sort). I'm very confident that, given a couple if months, we can sell it for enough to get the deposit amount we need (£102k left on mortgage, £18k deposit needed, current Zoopla value = £173k, realistic value £140k. Mortgage lender has agreed up to £300k /80% LTV).

So I guess my question is, if we reserve the new build, how soon will we need to pay the deposit?

middleclassbutpoor

You tell your solicitor that it is in the equity within your property and you tell the developer that is where it is coming from.

Shouldn't be an issue.

babyblade41

I think there was a thread quite recently about how to buy a new build whilst having a house to sell ..
The problem you have is getting any prospective buyer to wait whilst your house is being built.

My thoughts are is to sell yours first and then go for the new build... god knows why you'd want a new build but horses for courses I suppose .. go into rented /family/air bnb whilst waiting for completion

middleclassbutpoor

Yes, you need to tie the chain up.

You cannot reserve a house until you have an offer on your house. Once you have an offer accepted and your estate agent confirms this then they will reserve the house and start the process with your solicitor.

The risks are with buying a new build:

- Short period of time for exchange (usually 4-6 weeks from reservation)
- You do not know exactly when the property will be ready as the british weather and things like brexit could affect the build.
- You could lose your buyer after you exchange.

When you buy a pre-owned house, you will normally get the whole chain lined up before you exchange.

As said above - unless you can part ex with the builder, or you have a house that you can see has a roof on it already on the site, you are increasing the risk of lengthy delays and frustrating your buyer. People will therefore then consider breaking chain and moving in with family/going into rented etc to help remove that risk.

LittleMoo

babyblade41 wrote: »

The problem you have is getting any prospective buyer to wait whilst your house is being built.

If we weren't able to sell until 3 months time, it would only be 2 months for them to wait though. I guess I was more worried that we'd have to get a buyer within 28 of reserving or something like that.

The other issue is that I'm due to inherit some money once my late Aunt's house is sold. But as that could take ages we'd use it to make a lump sum payment on the Help to Buy loan.