Is it normal for the builder when agreeing terms in the contract for a new build in a development to request the buyer to sign and agree there is no subject to loan clause in the contract?
It’s a new and disturbing trend
If there’s a problem and your mortgage gets pulled you are in trouble
We had this issue and gambled. Our solicitor, my friend, was very apprehensive about it and advised us to be very cautious
Kind of have to take the chance there are no other options are there the builder has us over a barrel really?
Exactly, realistically as long as there is someone else looking for the property at that price I think you'll be okay, but if there's another credit dip between deposit and drawdown then you've issues
I am hoping drawdown will be sometime around next April or May so are you saying the risk is if there is a dip in property prices between now and then and the house valuation is less then I won't secure the required loan from the bank?
I don't foresee any changes coming with regards our employment or salaries, they should actually be higher by then.
What other risks are there to consider?
We had the exact same issue, and we just signed and closed this week.
Contractor refused to add a loan clause so our solicitor advised us not to sign anything until we were 100% sure there would be no issues with drawing down the mortgage.
We didn't sign the contracts until the bank confirmed (via our solicitor) that we were 100% covered on the draw down clauses.
But once we did sign, everything went smoothly from there, and it was a very quick turn around to closing.
Just be sure there are no issues that may affect your ability to draw down your mortgage and you will be fine.
Realistically though if you had signed without a subject to loan clause and lets imagine the bank declined the mortgage after signing for whatever reason... the builder surely would have very little chance of perusing you for €300-400k ...people dont have that kind of money under the coach or in assets.
But they have your deposit!
Its a low risk but material gamble, probably the biggest gamble I ever took
We really didn't want to hand over 25k without any protection. It's a lot of money to lose.
Sure the builder will probably just look for another buyer instead of chasing you... but I doubt any of them would give the deposit back
To update my own experience.
Finally have everything sorted and have closed. Main points:
New build house, west of Ireland, used help to buy.
Mortgage with PTSB - had a fantastic experience with the bank, very quick turn around on everything on their side, went from walking in the door to valuation in less than 2 weeks. Have a part gifted deposit, minimal savings, a personal loan and new car pcp. PTSB had no issues with any of these. - Highly recommend based on my personal experience.
Mortgage protection - really struggled here due to a chronic illness. turned down instantly by laya and irish life. Ended up going to the brokers at Lion.ie and I honestly can't praise them enough. had our application submitted in less than 24 hours and policy cover for us in less than 10 days. Even contacting us outside of work hours when needed. - Highly recommend them.
Had several issues with the vendors solicitor, but luckily we have a great solicitor who really fought for us. Made our life a lot less stressful.
Main issue is the developer refusing to add a loan clause.
This was sorted by not signing any contracts until we confirmed that there would be no issues with drawing down the mortgage, at which point we went quickly through signing to closing. Our solicitor kept us on track here. - Highly recommend the solicitor, if anyone in the west on Ireland wants their contact just pm me.
Developer refused to abide by the standard building agreement, instead using Homebond as a guarantee of quality. This caused several issues in terms of our personal security and bank draw down requirements. In the end the bank accepted the homebond certificate as a quality guarantee before draw down. this was only issued once the house was completed. - Again our solicitor was great in sorting this with the bank.
Cashback offer from bank - We get 2% cashback after draw down. they state up to 40days after, but we got ours on the 3rd working day after drawdown (massive help kitting out the house!)
Help to buy was no issue at all for any party, and as we are bound to a the htb 5 year requirement we decided to also take a 5 year fixed rate from the bank (3.2%).
One thing a lot of people do underestimate (we did) is the additional fees on top of the solicitor fees. they came to an additional 3600 after the solicitors fees. 2500 of that is the stamp duty.
Just a quick question on this, wondering if you were in the 80-90% LTV band? We went with BOI, fixed for 5 years at 3% a couple of months ago, this or KBC seemed to be the lowest rates I could find at the time. I'd be very tempted to switch if 2.25% was available.
Apologies. that is a typo. it should be 3 not 2! I'll fix that now.
But it is:
Most of the banks have lower interest rates now (I think ulsterbank have the lowest 2.3%?), they have been having a bit of a rate war lately.
That said, if you are locked into a fixed rate with BOI I don't know how easy it would be for you to move off that. There are usually fees tied to leaving a fixed rate. This is something to look into and weigh up if it is worth switching before you make any decisions.
Cool, thanks for the response.