As the government scrambles for solutions to the housing shortage, new-build developments are springing up across the country. A host of government incentives means there has never been a better time to buy new-build. The Help to Buy scheme and Starter Homes initiative are helping buyers get on the property ladder with deposits as little as 5% of the property value.
But purchasing a new build comes with its own set of challenges. Here is our guide to walk you through every stage of the process.
Finding a Development
You have an idea of the area you are looking to move to and have found a couple of new-build developments. Now would be a good time to start researching developers. A good place to start is with the House Builders Federation annual customer satisfaction survey. It will give you a good indication of the quality of different developer’s homes, and how homeowners rated their service.
You can also look at other development sites from the same developer. Try to find out how residents feel about them after they moved in. They have had the chance to reflect on the process and are usually in the best position to offer recommendations.
When you are choosing a developer, ensure you go for one which is a member of the National House-Building Council (NHBC). This means they have complied with the standards of the council. Members also provide a ten-year warranty and insurance on the property to project you against construction issues that arise in the first ten years.
Talk to a Mortgage Advisor
When you have found a few developments that have caught your eye and are happy with the reputation of the developer, it’s time to talk to a mortgage advisor and find out how much you can borrow.
Getting a mortgage for a new-build property is a double-edged sword. On the one hand, lenders typically restrict the percentage of the property’s value they will lend. For example, some lenders will not lend more than 75% of the value of a flat. However, the government equity loan initiative means you can receive a loan from the government for up to 20% of the property’s value. This mean’s you can offset the lender’s restrictions. The equity loan also comes at a much lower cost, with no interest at all for the first five years.
When talking to your mortgage adviser, bear in mind how long the mortgage offer lasts. Most last six months. However, if the developer will not have completed construction in six months, you will need to negotiate a longer validity period, which usually involves reassessing the mortgage.
Visit Show Homes
Now you know what your budget it, you can start viewing show homes. When you buy new build, you have the added difficulty in that you may not be able to see the finished property. Developers market show homes, but there are some developer tricks worth watching out for on any show home viewing.
Typically, developers use small furniture to create the illusion of space, and artificial light to create the illusion of natural light. They also may remove doors to show more natural flow. Keep these things in mind on your visit and try to imagine how a finished house might look without these amendments.
When you are looking around the show home, find out how many other units have been sold on the development and who they have been sold to. If they are all investors, you don’t want to be the only permanent residents in a ghost development.
If your property has not been completed yet, you have a lot more flexibility over price. Typically, the earlier in the construction process you buy, the cheaper the price and more you can negotiate. One tip is to negotiate the purchase near the end of the financial year. At the end of the financial year, developers publish their figures and will be looking for a last-minute boost to hit their bonuses.
Once you agree on a price, you will probably have to pay a reservation fee. This is non-refundable but should be deducted from the final purchase price.
Get a Conveyancer
Most developers will recommend a conveyancer, but it is worth finding your own. Look for a solicitor or conveyancer with a lot of experience in new-build sales to ensure you don’t get cheated in the small print. It might take a little longer but will protect you in the long run.
Have your Lender Evaluate the Property
Now your mortgage lender needs to evaluate the property. It will want to see evidence of a ten-year warranty as well.
Have a Snagging Survey Completed
When the construction is finished, before you move in, you need to have a snagging survey completed. It is essentially one final check to ensure everything is as it should be and there are defects in the construction.
You can do it yourself, but I would highly recommend going with an independent snagging company to carry out the checks. In the UK, almost a third of new builds have minor issues after construction. Many of these issues may not be apparent right away but appear after the property has been lived in for several months. For this reason alone, it is worth getting an independent company to make sure everything is perfect before you move in.
Completing and Moving in
Your house is completed, the snagging survey done, you are just about ready to move in. If your snagging report uncovered any issues, make sure you persevere with the developers to get them fixed and keep written records of all communications. Your house is under warranty, but if you have to take it up with your warranty provider, you will need extensive evidence that you have pursued the issue with your builder.
All that remains is completion. On completion, make sure the developer hands over the guarantees for any appliances that come with the property and are specified in the contract.
You are ready to move in and enjoy your new home. Congratulations.
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