Off-plan reservation and mortgage: too risky?

stevat

Hey all, 

my wife and I are first time buyers looking at a specific development that is getting launched for reservations in March but actual completion is not until Summer 2024, i.e. more than one year away.

Just had a chat with a broker (the one recommended by the estate agent that is marketing the development) and they mentioned that most mortgage offers are valid for 6 months and usually you can request and get one 3-month extension (and said only Halifax does 6+6). So their recommendation was to push back at the agent's/developer's insistence for exchange in 28 days after reservation and only exchange once it's less than 9 months from completion (long stop date presumably).

When we had an early chat with the estate agent (before the chat with the broker) they brushed off this concern, saying that it's easy to get mortgage extensions up to 12 months and that in practice it's more than likely it will be less than 12 months between exchange and completion. But this is not so re-assuring, it sounds like "trust me, everything will work out in the end"!

So, long-winded way to ask my question: Has anyone has success pushing back against the "must exchange in 28 days or thereabouts"?

Thanks for reading so far! I know this often comes up for discussion, but wanted to ask for some fresh insights especially given the current climate in the housing market / economy.

kingstreet

Barclays & NatWest do six plus six. Halifax works to a product drawdown deadline which for current newbuild products is 31/03/2024 and you can choose a new product at any time. You need to watch out for the valuation going stale and being refreshed at a lower amount.

stevat

Hey @kingstreet, thanks for your comment; it's a bit reassuring to know that there are multiple lenders that can do six plus six, even though we might need longer than that.

With Halifax, does choosing another product automatically extend the deadline or would this effectively be a new application?

Also, if the valuation gets refreshed at a lower amount, how does it affect our application if our LTV is around 65% and we're nowhere near the edge of our affordability? I believe a lower valuation can become an issue when borrowing very close to the max anount the lender is prepared to lend.

To go back to my initial question, any experience with clients successfully pushing back against the 28-day exchange deadline developers push for, so that the gap between exchange and completion gets shorter?

Thanks again!

user1977

stevat said:

To go back to my initial question, any experience with clients successfully pushing back against the 28-day exchange deadline developers push for, so that the gap between exchange and completion gets shorter?

In practice the 28 days is breached more often then not. But that doesn't mean you'll get away with stretching things out by months on end, assuming there are other buyers willing to sign up.

If they're currently estimating "Summer" 2024 for completion (when does "summer" end?), what are the developers likely to accept as a longstop date? Not before the end of 2024, I'd guess.

kingstreet

stevat said:

Hey @kingstreet, thanks for your comment; it's a bit reassuring to know that there are multiple lenders that can do six plus six, even though we might need longer than that.

With Halifax, does choosing another product automatically extend the deadline or would this effectively be a new application?

Also, if the valuation gets refreshed at a lower amount, how does it affect our application if our LTV is around 65% and we're nowhere near the edge of our affordability? I believe a lower valuation can become an issue when borrowing very close to the max anount the lender is prepared to lend.

To go back to my initial question, any experience with clients successfully pushing back against the 28-day exchange deadline developers push for, so that the gap between exchange and completion gets shorter?

Thanks again!

The new product is adopted and its drawdown deadline date then applies.

You will then be paying more than a surveyor thinks it's worth. Not a mortgage issue at that LTV.

Ask if a longstop date can be included in your contract if you can't get the exchange of contracts deadline pushed back.