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Since the credit crunch, mortgages on an assigned contract have been hard to come by – but times are changing. Now, in the face of mounting demand, we are delighted to announce Enness has teamed up with a couple of lenders to access their new range of assigned contract products. Going forward, we will be able to help secondary investors in property developments borrow the money they need to buy out the original purchasers. This, in turn, will make it easier to sell new-build flats bought while still under construction.
When you purchase a new build property that is not yet complete, you are doing what is known as buying ‘off-plan’. In most cases, you will be buying directly from the developer.
Complications arise when you are buying from a third party who has already reserved and exchanged on an off-plan property. This original buyer may either be sold to realise an increase in value or because they have been unable to obtain financing for the full value of the property.
At this stage, the person selling is not selling the actual property, as it has not been built yet; they are selling the contract. In the industry, this is known as an assigned contract – the developer is re-assigning the contract from the first client to you, essentially conferring the right to buy the property onto you.
Since the financial crash, most lenders have been reluctant to offer mortgages for assigned contracts. Historically, cases of mortgage fraud or property price inflation have been linked to this type of transaction, and they are thus perceived as high-risk. In the conservative lending environment of recent years, assigned contract mortgages have been rare.
Lenders’ attitudes are, however, beginning to change. Many of these properties can only be acquired by way of an assignment; this is particularly true for overseas buyers who have taken a long-term view of their investment. Market demand has prompted a handful of lenders to bring the product back – with, of course, an appropriate set of checks in place. This new class of assigned contract mortgages are aimed at sophisticated investors with a thorough understanding of the sector.
Enness’s partnership with these lenders means we have become one of just four London firms to have access to their full range of products. If you are buying a new build from a third party, or simply want more information about assigned contracts, we would be delighted to help. Drop us an email or give us a call and one of our expert advisers will be able to talk through your options with you.