Right, I'll try to keep this short but it's complicated.
Me and boyf bought cheap first home 2 yrs ago, terrible state, renovated it - equity now about £75k.
Despite all the hard work the location just isn't right for us.
Boyf was driving past place we love and spotted a new build in lovely place we never, ever, ever thought we could afford.
BUT to afford property we'd have to put down cash deposit now - ok, we have this, currently it's grass so we'd be buying off plan. Then we'd have to sell ours release the equity AND get a bigger mortgage.
Builders want to see mortgage offer on exchange - which is in a few weeks when we are supposed to put a deposit down.
Questions; 1) Mortgage advisor says it's more normal to get a mortgage promise but builders want an offer - offers are only usually valid for 6 months and the actual place won't be ready for another 10 i.e. when we would actually take up the mortgage
2) If we do get mortgage offer now, then do we have to stick with that lender and take up whatever deal they offer us in 10 months time? Or do we just get offer now to satisfy the buliders now and just get another deal nearer the time when we actually going to complete on it?
3) Is it a very risky and reckless thing to do seeing as how it's dependent upon the sale of our house? We'd want to minimise this by selling asap, banking it and renting but only realistically got 8 months to get completed sale.
Sorry it's such a long post, congrats for getting to here, you deserve another star! Any advice?
Hi - we were in a similar situation last year when we bought off plan. We had a mortgage offer for 6 months and had to get it extended twice because the building work took so long. At the time of exchange we did need to produce a mortgage offer, but I was told by our broker that if we hadn't completed in 6 months then we could look for another mortgage offer, not necessarily with the same lender. We were first time buyers so did not have the problem o having to sell, but I'm sure someone else on this board will be able to help there... Best of luck!
Dear trishwish, convince the builder you are serious about buying by putting your money where your mouth is and putting down a non returnable but small deposit with a view to going to exchange of contract within 1-2 months.Without the need for a mortgage offer(something which is not a requirement to exchange),you have time to then get the best deal possible.If he/she doesnt snap your hand of walk away(and out of interest see how long it takes for your phone to ring !!)Go for it ,best of luck.
Hi there, thanks for the advice so far. I've put down just £250 for now which is non-returnable and they're after exchange within 1-2 months with a 5% non-returnable deposit but they are insisting that a mortgage offer is required to exchange.
I think I'm just going to get a mortgage offer to satisfy the builders and put down a 5% cash deposit. Then sell our place, move into rented and get another mortgage offer nearer moving in time. Sounds easy doesn't it !
Well, yes, that's what our solicitor told us, basically the builders can run over or under schedule and just tough luck on us! Lucky builders can do what they like So the renting situation would be better on a month to month basis.
We've still not decided we're going for it yet. There's a lot of risk involved not selling house, not getting rented place, schedule over run etc... then again I guess all buying and selling is stressful.
I’ve never bought off plan before, but thinking aloud would you be at risk of loosing your 5% deposit if you didn’t manage to sell your present house? also if house prices drop alot are you tied in to pay an agreed price? I think I would find all that very stressful indeed, but best of luck with it.
BB, you've got straight to the heart of the risky bit. Yes, we would lose 5% deposit and yes, we would be tied in to agreed price. I've done my research and they are £40k cheaper than builder's prices for already built ones in a "worse" location.
I am having sleepless nights over it as I'm quite a cautious person, so this is why I've put it here to get my head around all the pros and cons. Don't want to go into anything like this unless my eyes are well and truly open to the risks (and of course advantages although there don't appear to be a lot of those )
It is unusual to exchange WITHOUT a mortgage offer, after all how would you know you can get a mortgage (that would go through) on the property you wish to buy and once you exchange you are committed to buy the house or lose your deposit in full (actually I think you are liable for 10% regardless).
Generally lenders are well used to dealing with new builds so should be able to accomodate the long completion date.
I am sure you know it is very high risk to purchase/exchange on one house before having sold/exchanged on your current home. Are you prepared to lose the money if the market cools and you can't get a sale ?
Don't worry Gimpl, I haven't actually done anything nor committed to anything yet , I'm just gathering information.
This is exactly the sort of thing I wanted to be told though and mirrors my thoughts on it. It appears from the posts here and what the solicitors say that the builders allow you no leeway if you have one to sell. Really, I guess they're after cash buyers, which we're not and will not be til we've sold our house which won't be for a few months.
I've also been told that if we put down a deposit then pull out and the builder has to find another buyer you not only lose your money but they can sue you for their fees and also for the difference between our agreed price and the new sale price if that is lower. I didn't know about the 10% thing though.
So, all in all it is very risky indeed. I knew that being able to afford a great place in a dream location would have some big catches and risks and indeed it does.
Huh, and there was me thinking it was easier to buy a new build when you are in a chain! I would have a dilemma if I was in the same position: would my flat in deepest chav land sell quickly?
Sometimes you have to take the bull by the horns so to speak.If you and bf want the place, go for it. IF you were really brave (and depending on your financial's) you could do a let to buy mortgage on your prop to raise sufficient deposit for the new venture and then rent your current place, this if nothing else would put you in control over the arrangements, save you selling fees!And possibly give you a thrill in the bargain.I know its against what you have been told so far, but hey should life always be about SAFE. Good luck.
Why not tackle this from the other way round? You have put down the £250 so now you have 1-2 months to get things sorted. So I recommend the first thing you need to do now is to get several EAs to value your existing house and get it on the market ASAP.
The interest and offers, or lack thereof, you get in the next few weeks will tell you how viable this scheme is.
If you get no interest or offers I recommend you don't stretch to another property now. On the other hand, if the sale goes well you will have your answer.
Now is not the time to take chances with the housing market!
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So the renting situation would be better on a month to month basis.
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