New property Mortgage withdraw after exchange contract

awec wrote: »

It is incredibly unlikely they'd do this. Clause or no clause, if you pull out you are more than likely going to get your deposit back.

The effect of this clause is overstated at times. The biggest risk to your deposit is the developer going bust, and in that scenario this clause is irrelevant.

I would not agree the clause is overstated. It’s one of the most important clauses in a contract and came about after the issues of the market crashing.

Most situations the contract deposit is held on trust with the builders solicitor and auctioneer so the builder only gets the money from HTB and revenue can claw that back if builder went bust.

Even if the deposit is released, homebond can cover loss of deposit where builder goes bust so you get that back. You have more security in those situations.

The clause also relates to issues with the valuation should valuations drop.

Claw Hammer wrote: »

The amount of any deposit made by the Policyholder to a maximum of 10% of the agreed contract price for the Housing Unit.

This is subject to a limit of €30,000 for any one Housing Unit and an aggregate limit of €1,000,000 for any one Developer.

If it appears that the total claims anticipated and paid under Section 1.1 for any one Developer will exceed the limit of €1,000,000, We may, at our discretion, reduce individual claims from all affected Policyholders. This reduction will be calculated by the ratio of total claims to the Limit of Indemnity of €1,000,000 for any one Developer.

Thanks for that.

When we were looking a new build it was stated in contracts that the deposit would be released up to the amount covered by homebond and the rest would be held as stakeholder by the solicitor. Our solicitor had the condition removed so it was all held by the stakeholder but I didn’t know the exact amounts that were covered.

c00114110 wrote: »

Would you mind to explain this in understandable English?

If the builder has 2m in deposits held and he goes bust the buyers will only get half their money back
Its 1 million divided by the number of deposits (assuming they all paid the same amount )
Basically pro rata

We had this clause in our contract (new build house in estate of 100 houses) when we bought our house last year. It was in everyone's contract and builders solicitors refused to remove it for anyone. Multiple people tried.

It wasn't a problem in the end for us. I doubt the builder would actually hold onto your deposit if your mortgage approval has issues. But it's your decision to accept the cause or walk away and find another house.

brisan wrote: »

You doubt the builder would hold on to the deposit
Some builders will hand the deposit back
At the end of the day you are gambling with what could possibly be 3 or 4 years saving for some people and losing any chance of ever owning a home
Yes the odds of getting the money back may be in your favour but it’s still a gamble and you have to take the risk
That’s why a lot of buyers solicitors will not agree to the clause
I know I never would and I have advised my 3 kids the same when they purchased

Yes it may be a small one but it's certainly a risk. It depends on how badly the op wants the house. If they walk away i'm sure the builder is not going to have much trouble finding someone to take their place. New builds are in demand and the builders know it.

You need to look at who is holding the deposit. In some case it is held by someone as stakeholder but not always.

brisan wrote: »

Even if held by a stakeholder if it says non-refundable in the contract then the builder is within his rights to demand the deposit if the purchaser pulls out of the contract
Being held by a stakeholder is only good if the builder goes bust
Bad publicity for the builder but if he has a waiting list for cancellations he may do it

There can't be a non-refundable booking deposit. If the buyer pulls out after both sides have signed the contract, the deposit can be forfeit. Builders are also including clause prohibiting assignment so the buyer can't sell on to get their deposit back from a substitute purchaser.

You can still recover deposit at this point, correct? I'd be inclined to walk away. There will be other opportunities without the risk.
I guess banks are not helpful on this lead time issue?

Most builders could easily manage this by asking for a bigger deposit or different rules around refunding in exchange for the clause, or a clause where they can also back out as described by another poster.

It has all the hallmarks of the selfishness and arrogance that got developers into NAMA before. Although I acknowledge one poster claims it could be a restriction placed on builder by their financer - but it is still a load of nonsense which does not reflect real life cash position of 99% of people living in the country.

There will be other opportunities without the risk.

Claw Hammer wrote: »

Booking deposits are always refundable. Contract deposits are not, unless by agreement. It would never be the case that a contract will be signed allowing for a change of mind and a deposit refund.

That’s correct. The loan clause only can be activated if something outside your control happens that you cannot draw down funds from your bank - it’s not if you change your mind.

How watertight is your Approval In Principal OP? Can the bank amend the offer between now and when you will be closing (which lets face it, the three people I know who bought a new build in the past 2 years faced a lengthy delay on their initial "move in" date).

If they can alter, Its not even the risk of losing your job or circumstances changing that could scupper you. The banks could offer max LTV ratios, they may be pickier with who they actually give money to, they might stop advancing credit altogether (small risk but there are rumours Ulster Bank are eyeing the exit door for example). In the event the banks dont advance credit to you, I wouldn't see the builder giving back the deposit as it's very likely they'll be in trouble themselves in such a scenario. This isn't to scaremonger or an opinion of what I think will happen but just to be aware of the risks.

Tough decision because if they won't budge and there aren't many new builds in the area, there will likely be plenty more to step in your place.

zootroid wrote: »

Is the subject to loan clause generally for new builds only? Or all houses?

All houses but it tends to always be accepted in second hand sales. Whereas builders are more reluctant to allow it.