We hear from a reader who’s current mortgage ends several months before their moving date. Is there a solution? Darren Polson offers a helping hand
The Question
My partner and I live in a two-bedroom flat, and we are hoping to buy a new build property which is not going to be ready until the Autumn.
It’s all very complicated with timings and we are grappling over the best time to put our property on the market.
We would like your advice with the mortgage part of the puzzle, please. Our current mortgage is due to end in June. But we’ll need to get a new mortgage in place for Autumn for a new home.
So, what happens in the meantime? Should we use the mortgage lender’s bank rate for a few months or is there a cheaper option? We need to save all the money we can so need to be smart about this! Thanks for your advice.
Darren’s Answer
This is a common concern when purchasing a new build property due to building timelines and when the legal work completes.
The good news is that based on what you have said, you may be able to remain in your current property until your new home is ready to move into.
If not, then there is a chance you may need to find alternative accommodation for a period of time.
A few points to remember when applying for a mortgage on a new build:
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- Mortgage offers usually last for six months, which means you may need to apply for an extension to the offer if the build isn’t complete. In some cases, your mortgage application will need to be re-assessed, your broker can help with this.
- Once you reserve the property, many builders will expect the exchange of contracts to be within 28 days, adding a degree of pressure to your mortgage application.
- Recognising they can be subject to delays, some lenders have special new build mortgages. These mortgages have a longer validity than usual deadlines.
- There may be incentives to purchase a new build from a particular developer, for example contributions to legal fees or stamp duty. Remember that lenders could factor in these in when reviewing your application.
- Specialist brokers will know the products and will be on hand should you need to move quickly to re-apply or find an alternative lender.
Regarding your current mortgage, there are options available:
Option 1: Standard variable rate
You can let your mortgage go onto the lender’s standard variable rate (SVR) for a few months until the new property is ready.
The issue with this is that the rate tends to be higher, but the upside is there are generally no Early Repayment Charges, meaning when your new property is ready you can clear the mortgage with no fees.
Option 2: Switch to a new mortgage
If you choose a new mortgage rate then you would need to look for a rate with no Early Repayment Charges, which does limit your options, but it can be done.
This process can be difficult to navigate, so do speak to a whole of market mortgage broker, who can provide advice based on your circumstances.
Meet our expert…
Darren Polson is head of mortgage operations at Aberdein Considine. He has been writing a regular column for What Mortgage for over two years and is now here to answer YOUR questions.
If you have a question for Darren please email kate.saines@emap.com or leave a message in the comments below.
