How to buy a new home off-plan

Posted 30 August 2017 by Helen Christie

Purchasing off-plan? Here is a comprehensive guide on everything you should know about buying a new build home off-plan

If you buy a home off-plan, it means you are agreeing to purchase before it has been built. Initially, the thought of buying a home without seeing it, a home that hasn’t even yet been built, may seem like a risk, but it is becoming more and more common.

We’ve put together a comprehensive guide to explain everything you need to know about buying a new build home off-plan.

How to buy a home off-plan

When you have found a suitable development, 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 usually around £500 - £1000.

Once this has been done, you must arrange your mortgage for your off-plan property. As there will not be a physical property to survey, the lender will arrange the surveyor’s valuation based on the developer's plans and the specifications of the development.

Next, you will need to complete all the paperwork, exchange contracts and pay your deposit. Once the property is finished, and ideally before you complete, you should have a snagging check to make sure there are no problems.

Advantages of buying off-plan

Buying off-plan could be the chance for you to be the early bird that catches the profit worm. 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 £280,000, 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 of up to 5% can be available for early off-plan purchases, with the best deals usually reserved for cash buyers and investors buying in bulk.

Purchasing off-plan could allow you to secure one of the best plots, perhaps with great views or a south-facing garden. You may also get a greater say in the specification of your chosen property. Talk to the developer if you wish to specify any particular details, such as kitchen or bathroom finish, flooring or garden landscaping. Find out if these will incur any additional costs and if these are negotiable for an early deal.

If you are hoping to use one of the government-backed schemes, it is possible to buy off-plan with Help to Buy on selected properties.

Disadvantages of buying off-plan

Property prices may fall. If you have agreed to pay £250,000 and the value has slumped to £220,000 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.

Most mortgage 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 reapply, 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.

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.

Does stamp duty apply?

You still have to pay stamp duty on off-plan properties, however many developers will include it in their fees.

How do you get a mortgage for an off-plan property?

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.

What questions should you ask?

How much is the reservation fee?

Is the price fixed?

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.  

How much is the deposit and how secure is it?

Are there any deals available?

The best deals tend to be available to cash buyers and investors, but discounts can be available for early purchases.

What is included in the price?

Find out if any fittings or furnishings are included, as well as stamp duty.

When does the developer expect to finish?

Case study

First-time buyers Tim and Xavier bought their home off-plan at Charters Wharf, a new development from Family Mosaic in Greenwich.

The couple are particularly happy to be moving into a new build apartment. Tim says: “It almost feels too good to be true, we’re so excited. We love the fact it is a new build property because it means we can put our own stamp on it and we love the idea of being the first people to live in our house. When you move into an older property it starts to become a project, but with this apartment we know that when we move in we can just drop our bags and make ourselves feel at home.”

What is Shared Ownership?
22 September 2017
To simplify Shared Ownership, WhatHouse? has created an infographic which covers everything you need to know about the scheme Read more
Advice
What you need to know about Exchange of Contracts
18 September 2017
If you’re buying or selling a property, you’ll need to know about Exchange of Contracts. Here’s your essential guideRead more
Mortgages & Homes
New build mortgages
12 September 2017
Here is everything you should know about getting a mortgage on a new build, along with some tips to ease the processRead more
Mortgages & Homes
Search  


Click here to see your activities