Newbuild - more than 6 months between exchange and completion, how does the mortgage work?

htb24

Hi all,

I reserved my first home a few months ago (Help To Buy), and am getting conflicting information regarding the next steps from the various players involved. I'm really hoping you can clear things up for me!

So my reservation end date is 9 March 2022, the estimated completion is October 2022 (which is probably optimistic).

Apparently I need to have all checks complete a mortgage offer in place (and the deposit paid) before my reservation runs out in mid-March.

Now my mortgage broker told me that mortgage offers are usually for 6 months max, and there's no guarantee that these can be extended. And if so, usually I'd have to pick a new product, i.e. the rates will get worse. He said for a deal estimated to complete in October he wouldn't look at mortgages before July or August usually. But apparently I need to have it all in place for March. He said he'd ask around to see if someone would guarantee a rate for 9 months, but even that would be cutting it very very close.

My solicitor told me I need to be 100% sure I'll have a mortgage in place for completion as I'll be contractually liable and will lose my deposit plus further costs otherwise.

How does all this add up? If I understand correctly I'd be signing a deal in March that I can't back out of anymore, to buy a flat some point in October (or probably later!) at an interest rate that I don't even know in advance? Rates have already gone up by 50% since I reserved. If they do the same again this year (which might well happen!) I'm suddenly looking at spending >£20k more than planned for my mortgage interest over the next 5 years. That would most certainly make me pull out of the deal as renting suddenly becomes a lot more attractive again.

I thought HTB was aimed at protecting first-time-buyers as much as possible - am I missing something here? 

I can't be the only one with a scenario like that and would really appreciate some advice here.

bramptonbrew

We reserved a new build in Dec 2020 and moved in July 2021. Our mortgage broker was able to find us a good deal with Halifax that was valid for 12 months, which took a lot of stress out of the situation - we knew it was unlikely we would need to extend. It might be worth speaking with your broker to see if any 12 month validity ones are still around? I don't know if it's just Halifax that offers them though.

Reginald74

We seemed to have a long deadline on our Halifax mortgage when we moved as well. I second trying them.  It may be possible to get one and extend it later.

kingstreet

Halifax newbuild products/offers are twelve months; Skipton's nine.

Other lenders offer six months with an automatic six month extension.

Sounds like your broker isn't well acquainted with newbuild.

user1977

htb24 said:

I thought HTB was aimed at protecting first-time-buyers as much as possible - am I missing something here? 

Yes, HTB just gives you a discount, it's not meant to affect any of the usual risks with buying newbuild properties and/or buying off-plan. And bear in mind you can still use it for newbuild properties which are already built (or at least not a year away from completion).

htb24

kingstreet said:

Halifax newbuild products/offers are twelve months; Skipton's nine.

Other lenders offer six months with an automatic six month extension.

Sounds like your broker isn't well acquainted with newbuild.

Interesting, that's very good to know - I'd happily pay a small premium to lock in a rate for 12 months!!

htb24

kingstreet said:

Other lenders offer six months with an automatic six month extension.

He did say that most lenders will offer an extension without any issues, but he said it's "50/50" as to whether I'd need to take out a new product (i.e. new rates) for that - which is the only thing I care about really...

K_S

@htb24 What stage are you at right now?

When it comes to recommending a specific product+lender (which will to some extent depend on what lender is competitive at that point in time), your broker will likely be able to fill in the blanks with regard to how the extension works as there are differences in processes and policy.

But if you need to have exchanged by mid-March (you mention a deposit), it's probably time to start thinking about settling on a specific lender/product and putting in the application.

htb24

My reservation end date is 9 March (I paid the £500 reservation deposit, and that's what it says on my form), which I'd assume means that we need to have exchanged by then? Another question no one has been able to really answer for me.

@kingstreet - I asked my broker about the 12 months at Halifax and he said while that might be true, the products still have "expiry dates" which will be less earlier than that. What's the point then?

As of now, he's quoted me 

• 1.53% (expiry June 2022)
• 1.63% (expiry December 2022)

for the 5-year-fixed 55% LTV London HTB deals from Halifax. Which compares to 1.33% at Barclays. I don't think I quite understand what a "product expiry date" is...

htb24

I've just called another mortgage broker and they were quite surprised anyone would offer 12 months, but "they would look into it and get back to me"... Can anyone recommend someone who actually knows what they're talking about? Sounds like @K_S might know someone

kingstreet

If you don't complete before the product's "drawdown deadline" you have to pick a new product from the current range. That's what's meant by a product expiry date.