When buying a new-build home there is a chance of your mortgage offer expiring before your house is built.
Those people reserving off-plan – which means the developer has not finished building it – are most likely to face unexpected delays. While the house builder may give you a completion date or completion will be ‘on notice’ . The past year has shown that developers can be hit by unexpected events outside their control.
For example, first-time buyers in Manchester may lose out on the Help to Buy scheme due to delays as a result of Covid-19. Sickness among the construction team means the homes will not be ready until later after the 31 March deadline.
This example shows that even the best laid plans can be delayed due to unforeseen circumstances.
Buying new-build homes
It is different buying new-build homes compared to those that have already been lived in. Buying from the market can be less complex because there are no delays in structural surveys as the house exists.
This means it is easier to estimate a completion date, providing there are no problems in the chain. According to gov.uk, it can take two to three months to buy a house, but it can be longer depending on the chain or legal issues.
With new-builds, developers give you a completion date or completion ‘on notice’. That means you are not given a set date for completion when you exchange.
When you buy a ready-built house, your solicitor will receive a range of paperwork, including home buyer surveys. This is not possible with a new-build house.
Instead, your solicitor is informed when a new-build guarantee provider issues a cover note confirming your property is sound structurally. If the build has been delayed due to weather or other issues, this will clearly take longer.
You cannot access your mortgage funds until that cover note is issued.
Why delays can cause issues
New-build home buyers are most likely to have issues when they reserve an early plot. Mortgages are generally valid for six months, but when the house is being built it may not be enough time.
Buyers then face the hassle of reapplying for a mortgage, which could mean extra valuation or application fees. Having to reapply could also mean extra credit checks.
This could also cause an issue if your financial situation has changed since the original mortgage offer was made.
Extended mortgage offers
At The Mortgage Dog, we are experienced in dealing with mortgages of all kinds. There are some lenders who offer specialist products for new-build homes. These include offer periods that are extended. So, rather than six months, the validation of the offer may extend to nine or more.
If you are dealing with a mortgage broker like us, we will advise you at our first meeting. Make sure you inform your broker that the house is new-build, especially if you are reserving off-plan.
Asking for an extension
If you have already had a mortgage offer and your new-build house is delayed, it is not the end of the world. You can ask your lender – or your broker – for an extension to your offer. Each lender is different and while some may agree, others may not.
If you’re using a broker, they will consider this when search for a deal, so make sure they know that your home is off-plan.
Minimise the risk of your offer expiring
You may not be able to speed up the building of your home. But if you take steps it can minimise the risk:
- Choose a mortgage offer tailored to new-builds
- Keep in touch with the house builder to keep tabs on progress
- If it seems likely your offer will expire before completion, speak to your lender as soon as you can
- Using a mortgage broker means you have someone experienced who can liaise with lenders on your behalf
Developers and mortgages
Some developers will insist you use their in-house mortgage broker. Be aware that you are free to choose any mortgage provider you wish. Developers are usually paid a finder’s fee from the broker, so that is why it is in their interest to use an in-house broker.
If you are reserving a new-build home and you want mortgage advice, please contact us today.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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