Do you want to buy a new build? Buying a new build property is an exciting journey. From moving into a brand-new home with modern features to potentially customising finishes to suit your taste, new builds have a lot to offer.
However, securing a mortgage for a new build can come with its own set of challenges. At The Mortgage Pod, we specialise in mortgages for new build properties and we’re here to make the process straightforward, ensuring you find the right mortgage to turn your dream into a reality.
What are Mortgages for New Builds?
A new build is a property that has recently been constructed and hasn’t been lived in before. It can include houses and flats built by property developers or self-build homes. New builds are often attractive to buyers for a few reasons:
- Modern designs and energy-efficient features.
- Lower maintenance costs compared to older properties.
- Incentives like the government’s Help to Buy Scheme (if applicable) or developer discounts.
Benefits of Buying a New Build House
Buying a new build home can be a fantastic option for many, especially first-time buyers, young families, and young professionals. Here are some compelling benefits:
- Energy Efficiency: New build homes are often more energy-efficient than older properties, thanks to modern construction standards and materials. This can lead to significant savings on energy bills and a reduced carbon footprint.
- Modern Design: These homes are designed with contemporary living in mind, featuring open-plan spaces, large windows, and sleek finishes that cater to modern tastes and lifestyles.
- Low Maintenance: With new materials and systems, new build homes typically require less maintenance compared to older properties. This means fewer unexpected repair costs and more peace of mind for you and your family.
- Warranty: Many new build homes come with a warranty, such as the National House Building Council (NHBC) 10-year certificate. This provides protection against structural defects and other issues, offering added security for your investment.
- No Chain: When buying a new build, you don’t have to worry about being part of a property chain. This can simplify the buying process and reduce the risk of delays. An issue a lot of homebuyers don’t prepare for when purchasing a pre-owned home.
Who is a New Build Mortgage Suitable For?
A new build mortgage is ideal for a variety of buyers looking to purchase recently built or extensively renovated properties. This includes:
- Off-Plan Property Buyers: Those purchasing a property that is yet to be built or is still under construction. This can often mean securing a home at a lower price before it’s completed.
- Buyers of Recently Finished Homes: Individuals looking to buy a property that has been completed within the last two years, ensuring they benefit from the latest building standards and designs.
- Renovated Property Buyers: Those interested in properties that have undergone significant alterations, revamps, or modernisation, making them almost as good as new.
Challenges of Getting Mortgages for New Builds
While buying a new build comes with benefits, getting a mortgage for one can have its challenges, including:
- Higher deposit requirements: Some lenders may require a deposit of 15-20% for new builds, especially flats.
- Strict timeframes: Developers often require buyers to exchange contracts within tight deadlines, typically 28 days.
- Property valuation concerns: Lenders may be cautious about potential overvaluation, especially in areas with multiple new builds.
- Limited lender options: Some lenders have specific criteria or restrictions for new build mortgages.
- Credit history: Lenders consider a borrower’s current and previous credit along with salary, outgoings, and other income sources to establish loan eligibility and competitive rates.
- Mortgage application challenges: The new build mortgage application process for new build properties can be complicated by potential construction delays and lender scrutiny. Buyers need to be aware of timelines and navigate lender requirements carefully to avoid losing deposits or facing legal issues.
- Time-sensitive mortgage offers: Mortgage offers for new builds typically last for six months, which can lead to complications if construction delays occur, potentially requiring buyers to restart their application process. If this happens, a new mortgage offer must be given to the potential buyers, and unfortunately the price of the property may have changed within this time.
Deposit Requirements for New Build Mortgages
The deposit requirements for new build mortgages can vary, but here are some general guidelines to keep in mind:
- New Build Houses: Typically, a deposit of 10-15% of the property’s value is required, although 5% deposit mortgages are available.
- New Build Flats: These often require a higher deposit, usually around 15-20%.
- Lower Deposit New Build Mortgages: Some lenders may offer mortgages with deposits as low as 5-10%, but these often come with higher interest rates or stricter lending criteria. For accurate figures, it’s a great idea to chat to a specialist new build mortgage broker.
How Much Can I Borrow on a New Build Mortgage?
The amount you can borrow on a new build mortgage depends on several factors, including your income, history of credit, and the lender’s criteria. Generally:
- Income Multiples: Mortgage lenders typically offer loans amounting to 4-5 times your annual salary.
- Additional Income: Other sources of income, such as pensions or investments, may also be considered.
- Deposit Size: A larger deposit can result in a lower loan-to-value (LTV) ratio, potentially unlocking better mortgage rates.
The New Build Mortgage Process
The process of securing a mortgage for a new build house can be more complex than it is for older properties. Here’s a general overview:
- Find and Reserve a Property: Identify a new build property and reserve it with the developer.
- Apply for a Mortgage: Submit your new build mortgage application and obtain an Agreement in Principle.
- Exchange Contracts: Once your mortgage is approved, contracts are exchanged with the developer and pay your deposit.
- Complete the Purchase: Finalise the purchase and move into your new home.
Builder Incentives and Freebies
Developers often offer incentives or freebies to attract buyers, such as:
- Legal Fees Paid: Covering your legal fees or contributing towards stamp duty.
- Discounts: Offering a reduction on the purchase price.
- Upgrades and Extras: Providing free upgrades or extras, such as enhanced kitchen or bathroom fittings.
However, it’s important to note that these incentives may impact your mortgage application. Lenders might adjust the amount they’re willing to lend or alter mortgage rates based on the value of these incentives.
Consulting with a mortgage broker can help you understand the implications and ensure you get the best mortgage deal.
How Can The Mortgage Pod Help?
At The Mortgage Pod, we understand the nuances of new build mortgages. Here’s how we can help:
- Specialist advice: We’ll guide you through the process and ensure you meet tight deadlines.
- Access to suitable lenders: We work with lenders experienced in financing new build properties, ensuring you get the best mortgage deal. Consulting with our mortgage experts will help you navigate the complexities and secure the best possible deal.
- Tailored solutions: Whether it’s a house or flat, we’ll find a new build mortgage that suits your financial circumstances.
- Support from start to finish: From securing your agreement in principle to liaising with developers and lenders, we’ll handle the hard work.
- Helping first-time buyers get onto the property ladder: We provide guidance on government schemes and mortgage solutions that make it easier for first-time buyers to purchase new build properties.
What Schemes Are Available for New Build Properties?
There are several government schemes designed to make new build mortgages more accessible:
- Help to Buy (Equity Loan): Available for first-time buyers, this equity loan scheme allows you to borrow up to 20% (or 40% in London) of the property’s value interest-free for five years. The Help to Buy: Equity Loan scheme can assist first-time buyers in entering the property market by meeting specific criteria, offering significant benefits while also having certain restrictions.
- Shared Ownership: With shared ownership, you buy a share of the property (usually 25-75%) and pay rent on the remainder.
- Deposit Unlock Scheme: Enables buyers to purchase a new build with just a 5% deposit.
- First Homes Scheme: Offers a discount of 30-50% on the market value of new builds for eligible first-time buyers.
We can help you to determine your eligibility for these schemes and guide you allllll the way through the application process.
What Do Lenders Consider for New Build Mortgages?
Lenders typically assess the following factors when approving a mortgage for a new build:
- Deposit size: Larger deposits often unlock better mortgage rates.
- Developer incentives: Some lenders may cap the amount of incentives (e.g., cashback or free upgrades) that can be included in your mortgage offer.
- Timeframes: Meeting tight deadlines for mortgage approvals and contract exchange is crucial.
- Mortgage lender criteria: Different mortgage lenders have varying criteria that can impact the approval process and deal structures, especially for unique circumstances like bad credit or self-employment. Understanding these requirements is essential.
- Purchase price: Builder incentives can influence the purchase price of new builds. Lenders consider these incentives when reviewing applications, and if they exceed a certain percentage of the purchase amount, it may lead to adjustments in the amount lent, directly impacting the effective purchase price for buyers.
Why Choose Us?
Securing a mortgage for a new build property requires expert knowledge, and that’s where we excel. Here’s why clients pick us:
- Experience: We specialise in new build mortgages and understand the challenges buyers face.
- Wide lender network: From high-street banks to specialist lenders, we’ll find the right mortgage deals for you, highlighting the variety of options available for new build properties.
- Personalised service: We take the time to understand your goals and ensure the process is as smooth as possible.
- Deadline management: We work quickly to meet developer deadlines and keep your purchase on track.
Get Started with The Mortgage Pod
Whether you’re buying your first home, looking to buy a new build, or exploring government schemes, The Mortgage Pod is here to help. Contact us today for expert advice and support on securing the perfect mortgage for your new build property.
