How can we buy a property off plan if they are requesting a large deposit upfront?

Posted on 24 February 2016 by Phoebe

We have been recently looking to buy a property in our area, as we currently rent, but want to buy a family home. We've found a company that's reselling an off-plan property, that will complete at the end of the year, for £40,000 less than the normal asking price. This would normally make the property affordable for us under a normal mortgage, especially if we were able to use the Help to Buy scheme. However, the company is asking for the entirety of the profit that they are making up-front - i.e., an £80,000 deposit. We don't have £80,000, and were wondering if there are any options we could explore in this context - or are these types of resales limited to those who are cash rich?

Thank you for your enquiry via our ‘Ask the Experts’ section of our website. This is an interesting situation and I would say that this particular property would suit a cash buyer or someone with a large deposit. Discounted purchases are not unusual as a number of developers will sell at lower prices once most of the site has been sold. The difficulty for you would be that you cannot raise any funds against the new home until you own it, so you could not borrow the funds upfront.

In addition, given the numbers you have provided in respect of deposit and income, I would estimate that the maximum borrowing you could potentially achieve on these would be around £200,000 to £225,000, maybe a little more. Our calculator on the John Charcol site can provide an indication on how much you can borrow. However, it's important to remember that you would also need to factor in buying costs such as solicitors fees and stamp duty, which at £300,000 purchase price would be £5,000. This means that you would only have a 5% deposit.

If you are buying an off plan or a new build apartment we have information on the John Charcol site here. But, in this situation I recommend that you contact us direct so we can give you an indication of how much you can borrow. This will then provide you with a better indication of the property price bracket that is suited to your financial details.

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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