You make me feel brand new
Buying a new-build property clearly has its advantages – no chain, no DIY, cheaper utility bills. But buying new is not without snags, as Caroline Laws finds out
Getting the keys to a brand-new house that no-one but you has lived in before is a tempting idea. And there are lots of people for whom that dream comes true each year. Last year around 160,000 new homes were built, with the total set to increase by 50,000 a year.
Made to measure
The advantages seem clear: you can avoid locking yourself into an upward chain, and if you buy early enough you can have a big say in the fixtures and fittings. You won't have any DIY bills, and, according to the National Energy Foundation, you can even save up to £500 a year on energy costs. Many are packed with the latest water-saving devices and use recycled and renewable materials. They're also more secure: burglar and fire alarms are often standard fittings.
Most new homes come with a 10-year warranty, and according to the terms, any faults will usually be corrected within two years at the builder's cost. After that, only structural faults are covered and you would have to make a claim to the insurer. The three well-known warranties are the National House Building Council (NHBC) warranty, the Zurich Insurance Building Guarantee and the Premier Guarantee. You should not consider buying a new home without a warranty, as you're unlikely to get a mortgage.
Many developers will offer a host of tempting incentives, including paying your deposit, legal fees and stamp duty. Some will also include expensive extras, such as carpets and flooring, so it can cost you a lot less to move into a new-build home than it would into a older property. But before you get carried away by the interior-designed show house and the lure of financial incentives, it pays to do your research.
Think twice
Marketing brochures and sales talk may overlook a few drawbacks to new-builds, such as smaller rooms and thin, plasterboard walls. Storage can also be a problem, especially in the fashionable three-storey townhouses, which sacrifice loft space. Many new-builds now have shared parking facilities and gardens are often simply compacted subsoil, with a thin layer of turf on top. Poor drainage means plants fail to thrive, so you may have to start again or call in a professional landscape gardener.
You should also look into transport links, and if you are planning to move on to a large estate, check whether community infrastructure such as local shops, doctors' surgeries and new schools are planned to cope with the extra people. Developments over a certain size must now legally include social housing, so you may want to check how this could affect your property.
As for buying 'off-plan' (before the home is built), Andrew Frankish, managing director of independent mortgage broker Mortgage Talk, points out that this can be a gamble: “The buyer does not know exactly what the property will turn out like, but the rewards are that the first people to buy on site will usually gain better incentives and prices as builders try to attract interest in the development. They must however be prepared to live on a building site for some considerable time, often without properly surfaced roads and with regular construction traffic.” If you'd rather wait until the house is built, it can pay to negotiate at the end of the builder's financial year when they will be keener to do a deal.
Before you start looking at new homes, check out the useful website newbuildinspections.com, which can arm you with a list of common show-home tricks, such as lights left permanently on to disguise the lack of natural light and missing items of essential furniture (such as wardrobes). It also provides details about the major house builders in the UK, such as Bryant, Bovis, Barratt, George Wimpey and Persimmon Homes, including customer satisfaction surveys on levels of service, and problems other buyers have encountered in the past. If you need to find out where the new-build developments are in your area, log on to the Smart New Homes and New Homes websites.
Sorting out the finances
It also helps to have mortgage finance in place before you start looking for a home, as often there is only a 28-day period before exchange of contracts takes place. And you need to establish exactly what's included in the deal. According to Andrew Frankish, if the builder is offering to pay a deposit or to stock the kitchen with white goods, you must tell your broker. He says: “Usually lenders are happy with a 5 per cent paid deposit, although often no more than that, but free domestic appliances, carpets and other furnishings can affect valuation levels.”
Andrew also points out that although you may exchange contracts within 28 days, completion may take many months more. Builders will usually avoid giving definite completion dates, saying only that completion will take place within 14 days of the house being finished. He warns: “If completion is more than six months after the borrower's mortgage offer, the offer will generally require renewing. Some lenders, such as Northern Rock and Alliance & Leicester, allow offers to be extended, although most will need either a new survey fee to be paid, or in the worst cases a fresh application fee.” This also means that you may have to take out another mortgage at a less competitive rate.
If you do face a long gap between exchange and completion, there is a niche product on the market called an exchange bond, which provides you with a deposit of 5 to 10 per cent of the purchase price, giving you the time to save up the money. Bonds can last from three months to four years. On completion you pay 100 per cent of the purchase price. There is a premium on the bond, so for example, if you were buying a house for £200,000 and took out a bond to provide 10 per cent deposit, the premium would be £850. You might therefore want to consider whether it's cheaper to save up for the deposit or talk direct to the developer to do a deal. For more information on exchange bonds, try exhangebond.com
Although there are exclusive new-build mortgages from brokers such as Halifax and BM Solutions, you should always compare them with conventional mortgages. And ask the developer abut any mortgages they can arrange too. If you are a key worker in the public sector, a council house tenant, or on the housing register, you may qualify for the government-backed NewBuild Homebuy (also known as shared ownership) scheme, especially if you live in an area where house prices are so high they are affecting recruitment and retention. Not all lenders offer mortgages for these schemes, so check out the Moneyfacts website for who does.
Moving in
Before you move into your new home, make a thorough check to ensure it is built to specification. This is called snagging, and around one-third of new properties have between 100 and 200 defects on completion. These are usually minor and include incomplete tile grouting or broken roof tiles, for example. Catriona Bright, director of the newbuildinspections.com and snagging.org websites, says: “The developer should give you the opportunity to examine the property or get a professional organisation to carry out a thorough snagging inspection before completion. They should then set to work immediately remedying the defects highlighted. Ideally it would be nice to get everything done before you move in, but bear in mind that there is no obligation on the developer to do anything within a specific timeframe.”
She recommends that if your property is complete before you exchange contracts, you should ask your solicitor to look into getting a timescale for snagging incorporated into the terms of the contract, ideally to state that all accepted items will be completed within 10 weeks of the date of completion. You should also consider holding back a retention of £5,000 to £10,000 until everything is done, and this includes the final wearing course for all the roads and pathways on the development. A professional inspection costs from £175 (including VAT); if you want to do it yourself, get a snagging checklist from Snagging.org for £14.99
Source: What Mortage
