So, what does buying a new home
off-plan involve and what are the pros and cons of doing so?
How to buy a home off-plan
When you’ve discovered an upcoming
new home that you would consider buying, and assuming you don’t have the cash
to buy it outright, it is a good idea to speak to a mortgage advisor first to
make sure you will be able to get the mortgage you need.
If this all goes well, you can
then reserve a home, or plot, at pay a reservation fee – this is typically
£1,000 but is at the discretion of the developer.
It’s best to appoint a solicitor
or conveyancer as soon as possible to ensure that all the legal steps of buying
a home are carried out properly. It will be particularly important to get
everything you’re expecting from the new home, such as upgrades and any changes
to the layout, included in the contract.
You can formally apply for your
mortgage. As there will not be a physical property to survey, the lender will
work to the surveyor’s valuation based on the developer's plans and the
specifications of the development.
When your finances and legal
documents are ready, you can exchange contracts and pay your deposit (usually
10% of the price).
Once the property is finished, you
should have a snagging check to make sure there are no problems in things like
brickwork, painting, pipes, fixtures and fittings, and that any issues that are
found are fixed. While it’s unlikely that a housebuilder will allow this to
happen before the building is completed, you can ask. You can do the snagging
yourself or hire a surveyor or specialist snagging inspector to do it for you.
Advantages of buying
off-plan
You’ll get all the benefits of
buying a brand-new home – the latest building standards in structure and energy
efficiency, low maintenance, the ‘blank canvas’ to personalise your home, and
the ability to choose from options and upgrades in things like kitchens,
flooring, tiling and built-in storage. It also comes with warranties to cover
problems that arise after you’ve purchased it.
You could have a larger range of
property types to choose from than if you waited for completion. There may only
be one or a few of the type you want; you could secure one of the best plots,
perhaps with great views or a south-facing garden. Purchasing off-plan means
you could get your first choice.
It might provide you with an early
profit. If you purchase early, the value of your property could increase
significantly before you even move in. For example, if you agree to pay
£250,000, and a year later, on completion, the property is worth £270,000, you
could sell immediately for a tidy profit.
Developers love selling off-plan
as it helps with cash flow and provides a surety that the property is sold.
With this in mind, discounts can be available for early off-plan purchases,
with the best deals usually reserved for cash buyers and investors buying in
bulk. A reduction in price of about 5% is typical.
Disadvantages of buying
off-plan
Property prices may fall. If you
have agreed to pay £250,000 and the value has slumped to £230,000 at
completion, your mortgage provider may get cold feet about lending the amount
originally promised, and the developer will still hold you to your contract,
which could create a shortfall.
There are relatively few mortgages
for off-plan homes and most home loan offers are only valid for six months. If
there are delays with the building and the property isn’t finished on time, you
may have to re-apply, and if your circumstances have changed, you may find
yourself with a property you have committed to buying and a need to secure a
new mortgage.
You may lose your deposit if the
purchase doesn’t happen.
Plans and brochures don’t always
provide a clear picture of views, noise and light. If you are one of the first
buyers to move in, you could experience disruption while other properties are
being completed.
Common questions about
buying a new home off-plan
Q: Does Stamp Duty apply?
A: You still have to pay Stamp
Duty on off-plan properties.
Q: How do you get a mortgage for
an off-plan property?
A: You apply for a mortgage in the
same way you would any property, however, it is a good idea to talk to a
mortgage broker who knows lenders that will support your off-plan purchase. As
mentioned above, most mortgage offers expire after six months, which may be
before the property is completed. If your circumstances change in the meantime,
the lender may not be keen to extend the offer, leaving you with a commitment
to purchase a property and a new mortgage to find. Some lenders may have
special deals for new builds, with longer completion deadlines, so always ask.
Q: Is the price fixed?
A: Find out if the price is locked
at exchange, and, if not, what happens if prices rise or fall before you
complete on the sale. And, no matter how big and reputable the developer, ask
what happens to your money if they go bust after you’ve exchange contracts, it
should be protected in a client money protection account.
Q: Are there any deals available?
A: The best deals tend to be
available to cash buyers and investors, but discounts can be available for
early purchases.
Q: What is included in the
purchase price?
A: Find out if any fittings or
furnishings are included, as well as any contribution to Stamp Duty.
Article taken from: What House
The Pros And Cons Of Buying Off-Plan - Posted
20 September 2022
https://www.whathouse.com/advice/the-pros-and-cons-of-buying-off-plan/