New Build Mortgages
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What is a new build home?
The term ‘new build’ applies to a home that has been built, converted, or renovated in the past two years and is being sold for the first time since that work has been carried out.
A mortgage can be secured on a property that has not yet been built or is only partially complete.
Why buy a new build home?
Reliability
A new build home is brand new, so in theory there shouldn’t be any issues with things not working as they should. That isn’t to say things can’t go wrong, but new build homes should be covered by a suitable warranty, such as NHBC. This means the builder is responsible for fixing defects and structural problems for a certain period of time.
Energy efficiency
New build homes tend to be much more energy efficient than older ones. This is because of modern building methods, the materials used in their construction, and their design. Some may even come with solar panels.
All this means new build properties can be cheaper to run than older houses.
Furthermore, homes that are more energy efficient can sometimes qualify for ‘green’ mortgages. Green mortgages are usually reserved for properties with an Energy Performance Certificate (EPC) rating of A or B. They tend to offer better interest rates than standard mortgages.
No upward chain
You won’t be buying off someone who needs to find somewhere else to move to, so you get peace of mind that the seller won’t pull out of the chain.
Special purchasing schemes
Some builders will offer properties for sale via special schemes. These schemes offer incentives such as smaller deposits or lower interest rates.
In addition, you might benefit from things like upgraded white goods or flooring.
Lenders will typically accept these incentives as long as they do not exceed 5% of the purchase price.
What special schemes are available? Has anything replaced Help to Buy?
Help to Buy is still available in Wales. It is currently slated to stop in March 2025.
Other schemes are on offer across the UK.
Deposit Unlock
Deposit Unlock lets you buy a new build home with a 5% deposit. Unlike Help to Buy, there is no equity loan element, so you’d need a 95% mortgage, too.
First Homes
Available to first time buyers, this scheme offers discounts of 30-50% off new build homes. Properties on the First Homes scheme can be hard to come by.
Own New
Own New’s Rate Reducer is a special type of mortgage for some new build properties. It offers a reduced interest rate compared to an equivalent normal mortgage, meaning you will benefit from lower payments for a few years.
Shared Ownership
On the Shared Ownership scheme, you buy a share in a property and pay rent on the bit you don’t own.
Why The Mortgage Store Chorley?
Exclusive rates you won’t get directly from lenders
A dedicated point of contact from initial enquiry right through to completion and beyond
Appointments seven days a week, to best suit your schedule
Ongoing rate monitoring until completion as standard
Do you have a question?
What are the downsides of buying a new build?
Cost
Anything new tends to come at a premium. New build homes tend to be more expensive than older properties. You might also have to pay a reservation fee which is typically a few hundred pounds.
Delays
If you’re buying a home that hasn’t been built yet, there’s no telling when you’ll get the keys. The builder will have a timescale to work to but bad weather or a shortage of materials could extend it by months. This then runs the risk of your buyer pulling out, if you’re having to sell your current home, or your mortgage offer expiring.
Space
Developers are in it to make money, which means building and selling as many houses as possible. The garden and rooms may be smaller than those of an older property. If the house is detached, it might only be by a very narrow space at the side of the house.
Is it harder to get a mortgage on a new build?
Buying a new build home with a mortgage can be more complicated than mortgaging an older property.
For starters, you might need a bigger deposit. As mentioned above, new build homes are often sold at a premium, and lenders can be concerned about their value dropping. The last thing they want is for you to be in negative equity – that’s when you owe the bank more than the house is worth. So they might insist on a bigger deposit to try and avoid this.
When you reserve your new build home, you will usually be asked to agree to exchange contracts by a certain date. This could be in as little as 28 days. The house might be nowhere near ready at this point!
You will need a mortgage offer before exchanging contracts, however, and a typical mortgage offer is only valid for six months. If the build is going to take longer than that, you will either need an extension, which isn’t guaranteed, or a new mortgage offer. A new offer would be subject to rates available at the time of the new application.
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What’s the minimum deposit needed on a new build?
There are mortgages available for new build houses with just a 5% deposit. More lenders should be available to you if you have a bigger deposit of at least 10%.
New build flats usually need a deposit of 15%, although there are lenders offering mortgages on new build flats with smaller deposits.
The bigger deposit you put down, the less you need to borrow. You might get access to better rates, too.
The level of deposit required depends on your personal circumstances, and may be bigger than the percentages quoted above.
How can The Mortgage Store Chorley help with new build mortgages?
At The Mortgage Store Chorley, we specialise in new build mortgages, working closely with builders and lenders alike to help our clients move into their perfect new build home.
If you’re looking for the right new build mortgage, don’t hesitate to get in touch.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
