What Are New Build Mortgages?
New build mortgages are loans intended for purchasing newly constructed properties or homes bought off-plan. Lenders typically have specific criteria for new builds due to their distinct features, such as pricing and construction schedules.
Essential Features of New Build Mortgages
• Deposit Requirements
New build mortgages often require higher deposits, usually between 15% and 20% of the purchase price, due to the perceived risk of fluctuating property values.
• Mortgage Offer Validity
Offers for new build mortgages typically last 6 to 12 months. If construction delays occur, you may need to extend the offer or reapply.
• Loan-to-Value (LTV)
Lenders may offer lower LTV ratios for new builds compared to older properties. LTV ratios between 75% and 85% are common, meaning a larger deposit is required.
• Builder Incentives
Developers may offer incentives such as covering legal fees, stamp duty, or including furnishings. While these can be advantageous, ensure they don’t artificially inflate the property’s purchase price.
The Steps Involved in Buying a New Build
• Reserve Your Property
Pay a reservation fee to secure your new home. This fee is usually deducted from the purchase price upon completion.
• Apply for a New Build Mortgage
Work with a lender experienced in new build properties. They will assess your financial situation and the property’s eligibility based on their lending criteria.
• Exchange Contracts
Once your mortgage is approved, exchange contracts with the developer. At this point, you’ll typically pay a 10% deposit.
• Completion
Once the property is ready, complete the purchase. Your mortgage funds will be released, and you can move into your new home.
Why Opt for a New Build Home?
When choosing a residential mortgage, understanding the options available is crucial. Here are the main types:
Energy Efficiency
New builds are constructed with modern, energy-efficient standards, helping to lower utility bills and reduce environmental impact.
Customisation Options
Many developers offer the opportunity to personalise elements of your new home, including fixtures, finishes, and layouts.
Build Warranties
Properties often include warranties from organisations like the National House Building Council (NHBC), which cover structural issues for up to 10 years.
Government Support
Schemes such as Shared Ownership and Help to Buy make new build homes more accessible for first-time buyers.
Factors to Consider When Buying a New Build
• Premium Pricing
New builds may be priced higher than older properties. Be mindful of potential value fluctuations in the short term.
• Snagging Issues
It’s important to inspect your new build for minor defects and address these with the developer before moving in.
• Legal Fees and Extras
Remember to factor in costs such as legal fees, stamp duty, and any additional furnishings when budgeting for your new build.
Advice for Securing a New Build Mortgage
• Save a Larger Deposit
A larger deposit increases your chances of approval and may help lower your interest rate.
• Work with a Mortgage Broker
A broker specialising in new build mortgages can connect you with lenders offering competitive rates and terms.
• Check the Build Warranty
Ensure the property is covered by a valid NHBC or similar warranty to meet lender requirements.
• Plan for Delays
Construction delays are common, so secure a mortgage offer with flexibility for extensions.
Advantages of New Build Mortgages
• Tailored Products
Lenders recognise the unique needs of new build buyers and provide specialised mortgage options.
• Modern Living
Enjoy the advantages of a newly built home, including energy efficiency and contemporary designs.
• Low Maintenance
New builds typically require less immediate maintenance compared to older properties.
FAQs About New Build Mortgages
Can first-time buyers apply for new build mortgages?
Yes, many first-time buyers use new build mortgages, often with the help of government schemes like Shared Ownership.
Do new build properties cost more?
New builds can be priced higher than older properties, but they often include warranties and energy-efficient features.
What deposit do I need?
Most new build mortgages require a deposit of 15%–20%, but some schemes allow for as low as 5%.
What happens if construction is delayed?
If your mortgage offer expires, you may need to reapply or request an extension from your lender.
Do new build homes have warranties?
Yes, most come with a 10-year warranty from NHBC or a similar provider, covering structural defects.
Why Choose Compare the Mortgage?
At Compare the Mortgage, we specialise in assisting buyers through the unique challenges of securing new build mortgages. Here’s how we can support you:
Tailored Advice
Discover the perfect mortgage for your new build home.
Expert Support
Support throughout the entire process, from application to completion.
Wide Network
Connect with lenders providing competitive rates and terms for new build properties.
Transparent Costs
Transparent explanations of fees and terms, ensuring there are no surprises.
Begin Your New Build Journey Today
Ready to explore your options? Contact Compare the Mortgage today for expert advice and customised solutions for new build mortgages. Let us help turn your dream of a new home into a reality.