New Build Mortgages
Steven Hargreaves explains the New Build mortgage process.
In just over 10 minutes you will know more about how to get a New Build mortgage.
Is it hard to get a mortgage for a new build?
It’s not particularly any more difficult than getting a mortgage on a second hand house. There are certain criteria that are slightly different, when somebody is looking to purchase a new build house and there are less lenders willing to offer a LTV (Loan to Value) of 95% than there are for older houses. New build flats are similar, you can find Lenders offering up to 90% LTV, and in some cases 95% with an existing flat, whereas with a new build flat they generally only offer around 85-90% LTV.
The application process is very similar, so you will still need pay slips, bank statements, proof of your deposit and proof of identification.
How long does the new build application process take?
When buying a new build, after submitting your documentation to the lender, the valuer would visit the property, albeit it might just be a piece of land with some foundations, but effectively that process is identical to any other property purchase. The lender would issue a mortgage offer, many lenders will provide longer offers because when you buy a new build house, it might take six to twelve months to build and for the mortgage to complete.
What deposit do I need and how much can I borrow?
As far as how much you can borrow, it’s identical to a second hand home. Lenders will typically offer around four times your income, depending on your job and circumstances. There are some professional mortgages that will lend up to six times your income.
The only difference is the percentage that they’ll lend. There are lenders that will go up to 95% LTV on a new build property, but the majority tend to offer 90% LTV on a house and 85% LTV on a flat.
Are there any other incentives available to people that buy a new build property?
The builders often provide incentives, but a lot depends on supply and demand. If they’re selling very quickly, they may not offer much in the way of incentives. If they’ve got a couple that they are struggling to sell, they may provide some free legal fees, free valuation and no stamp duty, or possibly include a carpet or curtains.
What sort of schemes are available on New Build properties?
There’s a new scheme that’s been announced, which is the Deposit Unlock Scheme. Currently, only a couple of lenders are taking part in the scheme, and a number of builders have signed up. This will take over from the Help to Buy scheme in due course.
Many builders are still offering Shared Ownership, where effectively you’re buying a share of the property. You will pay a mortgage on the percentage of the property you own and then pay rent on the other part of it. The Shared Ownership scheme is only available on new build properties.
What are the pros and cons of new build mortgages?
The pros are that nobody’s ever lived in that house. You’ve got a brand new house with your choice of kitchen, bathroom and colour scheme. From a con perspective, they do tend to be a little bit more expensive. So if you were looking at two very similar sized properties, one 15 years old and one brand new, you do tend to pay a premium for that new build property and they tend to be a little bit smaller than the comparable priced older property in a lot of cases. You don’t get the big generous gardens with a new build, because there’s no benefit to a builder to sell a big garden.
You need to liaise with the new build developer to establish when that property will be built, because you want to fit the mortgage around it. You do find that at times of the year there will be delays, for example when there is snow.
Your property may be repossessed if you do not keep up with your mortgage repayments. The Financial Conduct Authority does not regulate some Buy to Let Mortgages.