Standard practice for buying new house

MisterNick

Hope somebody can help please.
My son is buying a new house from one of the large builders. He's paid a £500 deposit and got mortgage AIP through their recommended broker.
The house is scheduled for completion April.
He was told today that they want the full deposit. He has negotiated end Jan.
Is this correct? and if so what happens if the builder goes bust. We are assuming that the mortgage provider (Halifax) will stump up the mortgage in January too.
Doesn't seem quite right and wouldn't work if he was using the equity in a house he was selling, but I can see some logic to it.
Many thanks  

No19v87

MisterNick said:

Hope somebody can help please.
My son is buying a new house from one of the large builders. He's paid a £500 deposit and got mortgage AIP through their recommended broker.
The house is scheduled for completion April.
He was told today that they want the full deposit. He has negotiated end Jan.
Is this correct? and if so what happens if the builder goes bust. We are assuming that the mortgage provider (Halifax) will stump up the mortgage in January too.
Doesn't seem quite right and wouldn't work if he was using the equity in a house he was selling, but I can see some logic to it.
Many thanks  

The builders put pressure to get contracts exchanged because at the moment, all they have is £500. They have very little security if your son pulls out.

However, your son has the potential to exchange in January and carry a risk until April of nothing going wrong (99/100 it doesn’t, of course). April will potentially be very close to the expiry date of his mortgage offer (if it’s 6 months, may be longer for a new build). In the event his offer expired as the house isn’t ready on time and he re-applied but was rejected, he’d lose his whole deposit and be at risk of the builders chasing him for breach of contract.

Of course this scenario is unlikely, if he keeps his circumstances the same and doesn’t make any silly credit decisions. But things can happen; redundancy for one example.

He’s done the wise thing to negotiate until January as that reduces the length of time the risk sits with him rather than the builder.

The reality is the builders act like they hold all the cards but they don’t want the deal to fall through as it’d cost them lots more in time and money than the £500 he’s given them. Hence why they have negotiated to January.

MisterNick

No19v87 said:

MisterNick said:

Hope somebody can help please.
My son is buying a new house from one of the large builders. He's paid a £500 deposit and got mortgage AIP through their recommended broker.
The house is scheduled for completion April.
He was told today that they want the full deposit. He has negotiated end Jan.
Is this correct? and if so what happens if the builder goes bust. We are assuming that the mortgage provider (Halifax) will stump up the mortgage in January too.
Doesn't seem quite right and wouldn't work if he was using the equity in a house he was selling, but I can see some logic to it.
Many thanks  

The builders put pressure to get contracts exchanged because at the moment, all they have is £500. They have very little security if your son pulls out.

However, your son has the potential to exchange in January and carry a risk until April of nothing going wrong (99/100 it doesn’t, of course). April will potentially be very close to the expiry date of his mortgage offer (if it’s 6 months, may be longer for a new build). In the event his offer expired as the house isn’t ready on time and he re-applied but was rejected, he’d lose his whole deposit and be at risk of the builders chasing him for breach of contract.

Of course this scenario is unlikely, if he keeps his circumstances the same and doesn’t make any silly credit decisions. But things can happen; redundancy for one example.

He’s done the wise thing to negotiate until January as that reduces the length of time the risk sits with him rather than the builder.

The reality is the builders act like they hold all the cards but they don’t want the deal to fall through as it’d cost them lots more in time and money than the £500 he’s given them. Hence why they have negotiated to January.

Thanks for replying, it helps put our minds at rest. I presume he has to get buildings and contents insurance from the time he exchanges rather than moves in. i'll suggest he get legal expense cover too.

darkcloudi

When I bought a new build with Taylor Wimpey I put down a deposit of 5% of the property value as took Help to Buy. If it wasn't a Help to Buy they would want 10%. Took the 5% option as it was easier and some protection if I wanted to withdraw I got my deposit back (cant remember exactly as it was 6 years ago). A deposit is required as guess it protects the builders I guess. The remaining amount was paid to Taylor Wimpey from the mortgage company on moving day.

If it was one of the bigger chain builders I doubt they would go bust unless something really bad happened.

I never took buildings or contents insurance, as there was no building built at the time or my contents was in there, I did require it when we officially moved in.

user1977

MisterNick said:

No19v87 said:

MisterNick said:

Hope somebody can help please.
My son is buying a new house from one of the large builders. He's paid a £500 deposit and got mortgage AIP through their recommended broker.
The house is scheduled for completion April.
He was told today that they want the full deposit. He has negotiated end Jan.
Is this correct? and if so what happens if the builder goes bust. We are assuming that the mortgage provider (Halifax) will stump up the mortgage in January too.
Doesn't seem quite right and wouldn't work if he was using the equity in a house he was selling, but I can see some logic to it.
Many thanks  

The builders put pressure to get contracts exchanged because at the moment, all they have is £500. They have very little security if your son pulls out.

However, your son has the potential to exchange in January and carry a risk until April of nothing going wrong (99/100 it doesn’t, of course). April will potentially be very close to the expiry date of his mortgage offer (if it’s 6 months, may be longer for a new build). In the event his offer expired as the house isn’t ready on time and he re-applied but was rejected, he’d lose his whole deposit and be at risk of the builders chasing him for breach of contract.

Of course this scenario is unlikely, if he keeps his circumstances the same and doesn’t make any silly credit decisions. But things can happen; redundancy for one example.

He’s done the wise thing to negotiate until January as that reduces the length of time the risk sits with him rather than the builder.

The reality is the builders act like they hold all the cards but they don’t want the deal to fall through as it’d cost them lots more in time and money than the £500 he’s given them. Hence why they have negotiated to January.

Thanks for replying, it helps put our minds at rest. I presume he has to get buildings and contents insurance from the time he exchanges rather than moves in. i'll suggest he get legal expense cover too.

No need to insure from exchange for new builds, the developer insures until completion.