27/10/2017
Are you considering buying a property off plan, but are not sure of the potential risks and rewards? We break down the essentials of what to do, as well as the pros and cons of buying off plan.
What is buying off plan?
Buying off plan is when you purchase a property before it’s been built. Whilst buying before a house or flat has even been built may sound like a risky thing to do, it’s becoming increasingly common to see show homes at entry-level city developments, where prospective buyers can view a replica of the property before it’s been built.
How do I buy off plan?
Buying off plan does come with its own set of challenges. You’ll need to carefully research the developer, and getting a mortgage on an off plan property can sometimes be a little more difficult.
When you’ve found a suitable development, research the developer by looking at their previous developments. Do their properties look the same as the pictures in the brochure, and can you find any evidence of satisfied customers online - such as on review sites or in online forums?
Once you’ve found a suitable development and you’re satisfied that the developer can deliver on what they’re promising, it’s time to speak to a mortgage adviser.
Your mortgage adviser will assess your circumstances, and if they assess you as suitable then you can proceed and reserve a property and pay the reservation – which can be as much as £1000.
When you’ve reserved a property, you will need to appoint a conveyancer to deal with legal issues, and then you will have to arrange a mortgage. Your mortgage provider will obtain a surveyor’s valuation.
When you have completed the mortgage paperwork, you can then exchange contracts and pay the deposit on your new property. You should have your new property inspected for defects in the weeks before completion - this is called a ‘snagging survey’.
When all of the above has been done, it’s time to prepare for completion. Your developer will usually provide you with two dates: the short stop, and the long stop date. The short stop date is the date the developer expects to complete, whilst the long stop date is the date they must complete by.
What are the advantages and disadvantages of buying off plan?
There are a number of advantages to buying off plan. These include the fact that your new property might be worth more when you move in than it cost when you paid for it. You may also benefit from government incentive schemes when buying the property, such as the Help to Buy equity loan, mentioned previously. You can sometimes secure a deposit of up to 5% on new builds too, saving you even more money.
There are of course potential disadvantages to buying off plan. Most mortgage providers do not offer mortgages specifically for off plan properties, which could make agreeing a loan trickier. If the completion date of your property is longer than six months, you may have to reapply for the mortage as most agreements are only valid for six months. And whilst your home could be worth more when you move in, if property prices increase significantly during the build, the size of the mortgage could change.
For more information on buying a property off plan, contact the professionals at Bentley Klyne today for impartial, expert advice.
