Should we still buy a new build?

Mattel1306

Hi all - looking for some advice and people’s thoughts on our current situation.

We have been waiting for a new build property in our area and one has finally come up that we are interested in. Building has just started and is due to be completed in the summer next year. At this stage we would need to put a reserve fee down and sign contracts committing to the purchase, with proof of mortgage offer not being required until Jan/Feb. We would expect this to be our long term home and so were we to buy we would be there for a good number of years, all being well.

Given the market situation I have two concerns and it would be great to hear from people with experience.

1) the builder has set the property value based on estate agent valuations off plan, allegedly. The price seems fair from rough £ psq ft calculations that I have done, but is there anything more appropriate I should be doing here. Particularly given the market I expect we are overpaying vs what we could push for, but do not want to push for a lower price at the risk of losing out entirely. Also as we would not expect to sell the property for 10+ years we are less sensitive, as I would assume we are not going to “lose money” over that length of time, even if the on-paper value drops for a couple of years.

2) everyone’s favourite question - mortgage rates. The obvious point to me at the moment is that we shouldn’t sign anything now that commits us to the purchase beyond the reserve fee of a few grand. We could get to Feb and rates be too high for us to get a mortgage for the amount we need, so cannot be in a situation where we are legally committed to buy but have no way of getting a mortgage. Are there any other elements or smart tactics I should think about here?

thanks for your help!

chrisw

You could get a few estimates of payments for different mortgage rates to get some idea of your mortgage eligibility in February. A figure of 6% seems to be bandied around, what would the payments be at that and, say, 10% if they carry on rising? Would it still be affordable? 

As it's a long term home maybe you could extend the mortgage term if finances are tight and maybe reduce the term again some time in the future with over payments or remortgaging.

user1977

Mattel1306 said:

1) the builder has set the property value based on estate agent valuations off plan, allegedly. The price seems fair from rough £ psq ft calculations that I have done, but is there anything more appropriate I should be doing here.

Such as what? Surveyors do their valuations off-plan too, so that's what your lender's valuer will also do. They may have a different opinion (developers will of course tend to take the most optimistic end of the range of values). While you can try haggling on the price, developers tend to be quite resistant to the headline price changing (though they might be more amenable to throwing in other incentives).

Rachelredwood16

If you have to exchange contracts before you can apply for a mortgage then obviously you'd be screwed if you can't go ahead as you'd be legally bound by exchanging and you'd have paid your full deposit on the house. In my experience (bought a new build 4 years ago), we had to exchange within 28 days of reserving or at the very least, be shown to be progressing quickly enough. I think this builder has now increased it to 56 days or something like that. I know a lot of builders do the '28 day exchange' thing but not all do. Have they said how long it would need to be for exchange? If they state that you need to exchange within x days and you don't you may find they'll pull the plug and relist like another poster on here experienced recently.

Why a new build? Do you need to use H2B to be able to buy? New builds are notoriously more expensive for what you get in comparison to a pre-existing property. So I don't think you can do the sums on whether its worth the price in comparison to other properties as you always pay a premium for being the first owner and being able to choose fixtures etc. 

Sarah1Mitty2

Stay away from new-builds until the effect of help to buy ending is more clear, and until interest rates have stabilised.

GixerKate

Are you expected to exchange contracts before having a mortgage in place?  That would be a no no from me as there are just too many variables for me to be comfortable with that.

If its a case of a reservation in place and then nearer the time you then get a mortgage in place and then exchange contracts then I don't see a problem if I'm honest.  The worst case scenario would be that you lose the reservation fee - have you talked this through with the sales agent?  If prices do drop then provided you haven't exchanged you can always potentially renegotiate the price (I did with my new build). 

Many people do not like new builds and that is fair enough, also there are many that lose value short term although from what you said that shouldn't be a problem.  I'm coming up to 2 years into owning my new build having moved in during lock-down and don't regret it at all.  I negotiated the original price of the new build and then had to renegotiate the price which the developer agreed to, two years on and the current value of my house has significantly increased plus have had two years of having my snags fixed by the developer rather than having to fork out myself.