What You Need to Know When Buying a Home Off-Plan
When you buy a home off-plan you know that no one will have ever lived in this property before you. There will be an element of choice when it comes to the interior fittings and the process whilst longer than a normal property purchase, is very exciting especially if you get to see the house at the different build stages. However, the perceived complexity of buying a home off-plan can deter some people. We have compiled this article to highlight the basics of what is involved in buying a home off-plan.
What is Buying Off-Plan?
Essentially, it’s when you a buy a property before it has been built. A big upside of buying off plan is you can access government help via the Help to Buy Scheme which will help to cover the deposit by way of an equity loan, if you are a first-time buyer or don’t already own a home. On the downside, getting a mortgage can be a challenge and there’s always some risk involved if the build doesn’t go according to plan and is delayed.
Here are our top tips if you want to buy off-plan:
1. Talk to a Financial Advisor
Assuming you will be buying your property with a mortgage, your first step should be talk to a knowledgeable financial advisor. A mortgage offer only lasts for six months, so check your timings and err on the side of caution as delays in developments are not uncommon. However, you can get a “Decision in Principle” and your financial advisor will be able to give specific advice based upon your circumstances and the developer’s requests. Working through the finance options should ensure, that you know what you can achieve and are ready to go when the time comes.
2. Understand your Circumstances
You may want to buy the property as your first home or you might want it as an investment or buy to let. That’s going to influence the type of mortgage you can get and whether you qualify for the Help to Buy equity loan. You may be able to reserve your property without financial commitment, however, upon Exchange of Contracts, which can be months ahead of the estimated build completion, you will need your deposit, with the balance of the sale price due upon Completion.
3. Pick Your Development
The next step, if you haven’t already done so, is to find the right development in the right area. You need to ensure that you do all the research possible on your developer, including checking they have insurance in case anything goes wrong during the construction phase. Don’t be afraid to ask questions. One great question to ask is: Is the property covered by the NHBC Buildmark warranty? The NHBC set industry standards that members must meet, should anything go wrong structurally with the property, it is covered by the NHBC for 10 years.
Due diligence is key here.
4. Paying the Reservation Fee
While it won’t be time to sort the mortgage out just yet, you may still need to pay a reservation fee once you’ve selected your development and the property you want. This can be as much as £1,000 to £2,000 or considerably more in some locations depending on demand. This initial stage gives both parties time to do their due diligence. The reservation usually lasts for 28 days but in some cases, depending on your circumstances and the developer, this can be extended by mutual agreement.
5. Hire a Conveyancer
You will also need to hire the services of a conveyancer to handle the legal aspects of reserving and buying the property. Once the reservation has been agreed you will need to pay a deposit on the purchase price, this can vary but is usually 5-10% (minus the initial reservation fee). There may be further staged payments along the way depending on the type of agreement you have. It’s important to have a Conveyancer who knows the ins and outs of off-plan buying on your side.
6. Choosing Fittings
The exciting part! Depending on your Developer, there will be options for you to decide upon. For example, you may get to choose your kitchen worktops and cupboards and flooring if it is included. Quite often new build homes come with white good options. There might be a number of extras available, like extra electrical sockets, turfing, as well as upgrades to appliances and fittings. If you are on a tight budget, look at the structural extras that will be painful to do retrospectively like sockets, rather than nice to have additions that can be fitted at a later date. This is one of the most exciting parts of buying off-plan, enjoy it!
7. Getting a Mortgage
The last stage is about watching the building take shape. Six months before completion (we would recommend building in a buffer to avoid having to re-apply for a mortgage and incurring the associated costs), you can begin applying for the mortgage. Once the property is completed, you will be sent the completion notice which usually gives you ten days to two weeks for the mortgage to be paid via your solicitor. The final step is to collect your keys and move into the property.
Good CommunicationLike all property purchases, good communication will be key to a stress-free experience. Make sure you are open with your development company and keep those lines of communication open. Make sure your financial adviser and conveyancer fully understand your circumstances so they can give you the right advice. If you are considering buying a new build property, for further advice speak to one of our local Property Experts, you can find your nearest office here.