The new build process from start to finish
By Aldermore Bank
Your client’s journey from making an offer to completion can be different if the property is newly built, says Jon Cooper, head of mortgage distribution at Aldermore
The new-build sector is a hugely important part of the housing and mortgage market.
But it can be complex and, if you’re not a specialist, parts of the purchase process may be unfamiliar.
From developers insisting on completion within one month, to build hold-ups meaning the mortgage offer runs out before completion, there are specialist features in this market that could blind-side brokers, as we explained in New build basics: A broker’s guide.
Understanding the process and what happens at each stage is important, so here’s what to expect when.
10 steps to new build completion
- First meeting: The buyer views a property and decides to buy. At this stage they put down a non-refundable reservation fee. In an ideal world they’ve already been to see you, got their finances ‘mortgage ready’, or even got an acceptance in principle from you. But it doesn’t always work like that. They may approach you having already paid their reservation fee and with strict deadlines in place that you need to meet.
- Clock is ticking: If the property is already built, the developer may require your client to exchange within one month. This is a huge difference to the existing home purchase process with obvious implications for brokers. The clock is ticking, and the mortgage needs to be sourced and approved fast.
- Sourcing new build: It’s important to consider two key differences at the pre-submission stage. Firstly, lending criteria is very different on new build. There is potentially more limited availability, especially if the property is a new build flat, plus the maximum loan-to-value could be restricted. Secondly, if the developer has set a deadline, you’ll need to consider current service levels of lenders and their experience in dealing with new build cases.
- Homeownership schemes: Of course, the process is more complex if your client is using a government homeownership scheme, depending on which it is. With Help to Buy, for example, the client first needs to complete a Property Information Form, detailing their income and deposit along with other details, including their proposed mortgage. The Property Information Form and builder’s reservation form is then sent to the local Help to Buy Agent who will check they can afford the mortgage before giving ‘Authority to Proceed.’ A full mortgage application cannot be made without this.
- Conveyancing expertise needed:At this stage, the conveyancer is appointed. Of course, your client may insist on their own conveyancer, but if they ask for a referral be sure to advise a firm with new build expertise. The process is very different and your client’s solicitor needs to check planning permissions, covenants and NHBC warranties among other things, so you want to know they are experienced in this sector.
- Green mortgages: If the new build property is eligible for a green mortgage and it’s right for your client, make sure you get a copy of the EPC or SAP rating from the developer, as the lender will need to check it meets their criteria. Once you’re confident the case fits, it’s time to submit the application. Of course, you’ll also need to upload all the other relevant documents at this stage.
- New build valuations: Before the lender makes an offer the valuation is instructed. However, if the property is being bought off-plan the initial valuation will be based only on the plans and development specification. Remember that a mortgage offer is usually only valid for six months. If an off-plan build experiences delays, the mortgage could potentially expire. You may need to get an extension, or source a new mortgage down the line. Also, the lender may want to value the property again before completion. If it’s worth less than expected, the mortgage offer could be withdrawn.
- Legals are completed: If the property is being purchased through Help to Buy the conveyancer needs to get approval to exchange from the local Help to Buy Agent, after checking all the details match the Authority to Proceed form.
- Exchange of contracts: Remember this could be as little as 28 days after your clients has reserved their new home. Or it could be months down the line if they’ve bought off-plan. The completion date will be set on exchange as normal.
- Completion. As with other purchases, the funds are transferred on completion day and your client gets the keys to their new home. If they’re using Help to Buy it’s slightly different as Homes England needs to transfer funds as well as the lender, but it shouldn’t cause any delays. Also, a second charge will be registered on their new home to Homes England after the lender’s first charge.
For adviser use only. Please note this content has been supplied by our lender partner and as such, is their responsibility. No party shall have any right of action against Legal & General in relation to the accuracy or completeness of the information in this article.