Help to Buy (HTB): top tips for your purchase (Part 2)
So, you have reserved your dream home, spoken with a broker and instructed your solicitor. In this article, we give you our top tips on what you can do to make your property purchase more streamlined.
If you have agreed an incentive/allowance with the developer, this will be noted on the CML form. This form is required for all newly built property yet to occupied or purchased for the first time. Although your solicitor will always request this form from the developer, it is important to inform your solicitor of any incentives agreed so they can ensure there are adequate provisions in the contract. Both your lender and HTB will require a copy, so disclose this to your broker when making your HTB and mortgage application so they are aware from the outset.
You won’t be able to purchase your property or exchange contracts until you have your mortgage offer – the purchase process and mortgage application will often happen simultaneously. What most people don’t realise is that, while your solicitor is acting on your behalf, they will also be instructed to act on behalf of your lender too and your lender has a detailed set of instructions that your solicitor is also required to comply with.
To ensure your offer is issued correctly and avoid any delays in the offer being reissued because of errors, you should ensure that your mortgage broker is given full information from the outset. This will include, among other things, your full name including any middle names, the correct property address, ground rent and service charge figures and the remaining lease length. You should also make them aware of any adult occupiers from the outset, as this will need to be noted in your mortgage offer.
Source of funds
Law firms are governed by strict regulations in relation to money laundering and must comply with various requirements before they can accept transfers of money into their accounts. This is what you will be expected to provide, so you should start gathering this now:
You will be required to show bank statements setting out the source of any funds you will be contributing towards the purchase (and expect to have to provide further details about any recent lump sums, other than your salary, that you have received).
If you are purchasing under the HTB scheme, then your bank statements will also need to be sent to HTB together with a brief explanation as to the source of the funds.
If you are being gifted any funds towards your purchase, you will also need to supply further details as to the source of any gifted funds (and your lender may have additional requirements). You may have had to provide similar information to your broker from the outset but please note that this will need to be repeated to meet legal requirements, even though this may seem like duplication!
LISA (and other types of account)
If your funds are held in any other type of account, such as a LISA account, then you will need to find out what your bank’s requirements are for this, as notice is required before they can send funds to us.
This is particularly important when purchasing a new build, as there is generally an exchange deadline of 28 days. It is also important to note that a LISA can only be used if the value of the property does not exceed £450,000.
You will need to provide a closing statement to enable us to apply for your bonus. Please note the bonus amount cannot be used towards your deposit and will need to be applied for on exchange to go towards completion. HTB ISAs can also only be used if the value of the property does not exceed £450,000 (or £250,000 outside London).
You should also consider whether your bank limits the amount you can transfer each day (for example, there is often a £10,000 or £20,000 daily cap), as you don’t want to have to delay the exchange on the basis that you cannot transfer the full deposit funds in time.
Ultimately, it is important to be as prepared as you can be in terms of funds, and you should let your solicitor have a complete and accurate picture as to the source of your funds as soon as possible.
Will I need a survey?
It’s not essential to carry out a survey on a new build property, as your solicitor will ensure that the property comes with full Building Regulations sign off and that you receive a structural guarantee, usually for a period of 10 years.
The new home guarantee provides buyers with protection as it ensures standards for design, materials and workmanship are followed during construction. There are some exclusions though – the guarantee will not for example cover general wear and tear and not all lenders accept every warranty provider. The validity must still be checked by your solicitor before any purchase contract is entered into. Whilst there is no requirement for a survey, you may decide to obtain one for your own peace of mind.
What is a snagging survey?
If you are purchasing ‘off plan’, an inspection is carried out once the property is complete to discover any defects or problems that must be rectified. This can be done by you or a professional. Each developer will have their own process for this and there should be a suitable provision in the contract to cover it. Your solicitor will be able to advise you as to the snagging procedure offered by your developer.
What searches do I need?
The standard property searches are the chancel, environmental, water and drainage and local authority search, and your lender will require you to obtain each of these. There are other additional searches that may be necessary in certain circumstances and locations. Local authority search return times vary widely, but some authorities are subject to severe delays due to the pandemic.
Your search results are valid for 6 months (and are not acceptable for lending purposes after 6 months) so, if you are purchasing ‘off plan’ or completion is scheduled for over 6 months away, you may need to obtain an insurance policy for validation of the searches and, again, your solicitor will be able to advise you of the costs involved here.
Stay tuned for Part 3: FAQs for purchasing your first (or any) property!
For further information, please don’t hesitate to contact our New Build Real Estate team.