New build to let mortgages are for homes that have been recently built. Most buy-to-let landlords purchase property for rental using a buy-to-let commercial mortgage, but if the house is classified as new build, lenders will often have different lending criteria to what they have for older houses.
What is new build?
New build homes are those that have been recently built. Some lenders define property that is up to four years old as new build.
Why are new build homes treated differently?
A few years ago, in the height of the property boom, some investors, valuers and lawyers combined to operate a scheme whereby newly built flats were overvalued, then sold to investors at so-called discount rates. The investor used a bridging loan to purchase the flat, then would immediately remortgage the flat for the overvalued price. When the property market crashed, it was found that a number of mortgages had been secured on new flats that could not be sold at prices to cover the mortgages debts.
This made lenders wary of lending on new properties, so they introduced strict rules to prevent this type of fraud.
Why must the home be over six months old?
Due to the above fraudulent scheme, many lenders want the home to be at least six months old, as this gives time for the true value of the property to be established. Not all lenders will be that strict and will consider newer homes.
Can I get a commercial mortgage for off-plan new builds?
It is possible to buy off-plan before a home has been built. You may be able to get a commercial buy-to-let mortgage for this, but not all lenders will consider off-plan purchases. It may be difficult to value the property, especially if no other buildings have been completed on a new build site. As the development progresses, the value of the property could change.
Also, remember that there could be delays in the project, which can delay the completion of the house and the time it takes for a tenant to move in and start paying rent.
Do I need to use a mortgage broker?
There is no law stopping you approaching mortgage lenders direct, but you may not get a good deal, and the lender may not be experienced in the new build buy-to-let mortgages sector.
The experts at Ascot Mortgage understand the buy-to-let market and will provide you with a picture of all your finance options for a new build home.
If you are a new landlord, you should consider joining the National Landlords Association, which can also help with questions about finance for both new and older residential rental property.
A buy-to-let investment is a medium to long-term investment strategy. At Ascot Mortgages, we can advise you on all the costs involved in applying for a commercial mortgage for property and give advice on your business plan. That way, you can obtain a reasonable return on your investment.