Buying a brand-new home straight out of the wrapper
Hello and welcome to the latest edition of my mortgage advice column.
It’s been three years since I started providing advice and guidance to the local community in this way, across all aspects of mortgages.
I hope it’s proven useful for you so a big thank you to all the readers and for the positive feedback over that time.
This month, I want to focus on the process of buying a newbuild property.
You will probably have noticed various new-build estates cropping up in East Kilbride over the last few years, ranging from the large building companies to smaller developers.
If you like the idea of buying a brand new home fresh out of the wrapper, then a new-build home could be ideal for you. You won’t need to compete with other buyers and possibly end up paying over the asking price.
You can also avoid a bidding war with other buyers, especially when a ‘closing date’ is involved and you won’t have the disappointment of your best offer being declined.
The first step, as with any new purchase, is getting your mortgage ‘decision in principle’ agreed for the relevant mortgage you’ll need for the property you want to buy. A mortgage broker, like ourselves, can help with this by providing expert advice on the most suitable package for you and search the market to find this without you having to find it yourself.
The next step would be to make an appointment with the builder’s sales office so you can discuss what plots are available and when they are due to be completed.
At this stage, most newbuilds will either be under construction or due to start shortly. If you’re lucky, they may already be built so you could move in very soon after reservation of the plot.
The sales agent will give you a window of anticipated completion over a two- or three-month period. However, this can be brought forward or moved back, it really depends on weather conditions, staffing levels and supplies etc.
You should have the chance to visit the show home at this initial meeting, however if the site is still in its early stages, they may have other sites you can visit to get an idea of what the finished house will be like.
I would also take the opportunity at this stage to negotiate any extras to be included in your purchase as this could potentially save you a lot of money.
This can be anything from deposit contribution, flooring and fencing, to integrated appliances – the sales agent will let you know what can be included.
Most mortgage lenders will allow a builder to provide up to five per cent of the purchase price in financial incentives, usually in the form of a deposit contribution, meaning that you don’t necessarily have to put down as much deposit as you thought yourself. If you’re happy with the plot and any builder incentives being offered, then you can reserve the property. Usually, this is with a reservation fee to secure the plot for you until your mortgage offer comes through.
Reservation fees differ from builder to builder but a common fee range would be £250-£500 at this stage.
After the reservation fee is paid, the builder will expect you to apply formally for your mortgage and supply them with your mortgage offer within a month or so.
This part is important as you should discuss with your mortgage broker when the mortgage offer is valid until, and if it coincides with the expected completion date.
Some lenders may allow an extension to the original mortgage offer if there’s a delay to the build, however some require a brand new application to be processed, so always double check this.
Your solicitor will discuss the conclusion of missives, which is when you’re legally bound to purchase the property. It’s then a matter of counting down the days until the legal work is complete and you move in.
We are seeing more and more inquiries around buying new builds this year due to the current climate, but as with everything, there’s only so many houses to go around, so if you’re hoping to move house this year, it’s worth looking now to see what’s out there.
I hope that’s been useful and see you all next month.