New Build Home Mortgage Advisors

Purchasing a new-build property can be an exciting venture, offering you the chance to be the very first occupant of a brand-new home. However, securing a mortgage for a new build comes with its own set of considerations. Let’s explore what you need to know.

What is a New-Build Property?

A new-build property is a home that has been newly constructed and has never been lived in before. These properties can be bought directly from a developer. New build homes are popular for their:

• Modern layouts and high-quality specifications
• Improved energy efficiency
• Lower running and maintenance costs
• Developer warranties and protection schemes

Many new-build buyers also value the ability to secure a property early and tailor elements such as flooring, fixtures, and finishes.

What Are the Benefits of Buying a New Build?

There are several advantages to buying a new-build property:

• Modern Standards: New builds are constructed to meet the latest building regulations, meaning they are more energy-efficient and potentially cheaper to run.
• Warranty: Most new-build homes come with a 10-year warranty, such as the NHBC Buildmark, which covers structural defects.
• Customisation: If you buy off-plan (before the house is built), you may have the opportunity to choose finishes and fittings.
• No Upward Chain: Buying a new build eliminates the risk of a property chain, which can make the purchasing process smoother.
• Potential Incentives: Developers may offer incentives such as contribution toward legal fees, upgraded interiors, or contributions toward your deposit.

Disadvantages of Buying a New Build

While there are many benefits, there are also some drawbacks to consider:

• Premium Pricing: New build homes are often sold at a premium compared to similar older properties. This is sometimes referred to as a “new-build premium.”
• Depreciation: Like a new car, a new-build home might lose value in the first few years after purchase, especially if you buy at the peak of the market.
• Delays: If buying off-plan, construction delays can occur, which may impact your moving timeline.
• Stricter Lending Criteria: Some lenders apply lower maximum loan-to-value (LTV) limits, especially for new build flats.

How Do New Build Mortgages Work?

A new build mortgage functions much like a standard mortgage, but with additional considerations due to the property type. Here’s how the process typically works:

1. Secure a Mortgage Agreement in Principle

Developers often request an AIP before reserving a plot. This shows you are financially eligible to proceed.

2. Reserve your new build home

You will usually pay a reservation fee to take the property off the market.

3. Apply for your mortgage

Your mortgage offer may need to be valid for a longer period, especially with off-plan purchases. Some lenders offer extended offer validity specifically for new builds.

4. Developer deadlines

Most developers require exchange within 28 days of reservation. Having an experienced broker helps ensure the process stays on track.

5. Completion

This may be immediate (for a finished home) or delayed (for off-plan purchases). If completion is several months away, your mortgage offer may need refreshing.

Is Mortgage Lender Criteria Stricter for New Builds?

Yes, lenders tend to be more cautious when it comes to offering new build mortgages. This is due to the perceived higher risk associated with the depreciation of new properties. Common restrictions include:

• Higher Deposit Requirements: Lenders may require a larger deposit for a new-build home, often at least 10% of the property’s value.
• Limited Mortgage Products: Not all lenders offer mortgages for new builds, so your options may be more limited
• Shorter Offer Validity: Standard mortgage offers last around six months, but new build properties may require extended validity due to build times.
• Potential Valuation Differences: Occasionally, surveyors may value a new build at slightly less than the developer’s asking price, which may affect borrowing.

Who is Suitable for a New Build Mortgage?

A new build mortgage may be suitable if you are:

• A first-time buyer looking for a modern, low-maintenance home
• A home mover seeking energy efficiency and contemporary design
• Someone buying off-plan and wanting to personalise the property
• A buyer looking to benefit from government schemes on new build homes
• A self-employed or professional applicant needing specialist lender support.

What to Consider When Applying for a New Build Mortgage

Before choosing a new build mortgage, there’s a few things you’ll need to consider:

Eligibility criteria

To be eligible for a new build mortgage, you need to fit the following criteria:

• Aged 18 or over
• Able to repay in full by the age of 75
• Proof of a stable income.

Deposit size

Lenders often require larger deposits for new builds. For a new build house, this may be 10-15% of the property’s cost and for new build flats, it is generally around 15-25%. However, there are schemes available that can help lower this. 

Repayment amount

The amount you repay will depend on the amount you borrow, what type of mortgage you choose and the term you choose. The majority of people opt for a repayment mortgage which has fixed monthly payments. If you’re buying off plan, you won’t start making repayments until your home is finished.

National House Building Council (NHBC) Buildmark

Before accepting your mortgage application, lenders will often need to see evidence of an NHBC Buildmark. This is a 10 year warranty that comes with all new build properties to cover the quality of construction.

Where Can I Get Help to Buy a New-Build Property?

There are several government schemes available to help you purchase a new build:

• • Shared Ownership: This option allows you to buy a share of a new build property (usually between 25% and 75%) and pay rent on the remaining share.
  • First Homes Scheme: This scheme offers homes for 30-50% less than market value to first-time buyers who meet specific criteria.

• Deposit Unlock Scheme: This scheme allows eligible buyers to get a mortgage with a 5% deposit for a new build property.  

• Lifetime ISA: A tax-free savings account for those under 40 where the Government adds a 25% bonus to your savings, up to £1000 a year.

• Help to Buy Equity Loan: Only available in Wales. This scheme allows you to borrow up to 20% of the property’s value interest-free for the first five years, requiring only a 5% deposit.

Compare New Build Mortgages

Comparing new build mortgages is essential, as not all lenders offer the same terms or LTV limits. At Ascot Mortgages, we compare lenders across the whole market, helping you to secure the most competitive deals available. Get in touch today with one of our new build mortgage advisors to find out more.