New Build Mortgage
The prospect of a newly built home is attractive to buyers, especially first-time buyers and for good reason. Many homebuyers favour the idea that they will be the first to live in the property and the guarantees that come with the new property too. People also like the fact they can put their own stamp on their new home and select fixtures and fittings to tailor the property to their taste.
However, there are some things that people should be aware of when it comes to new build mortgages. But with our help, applying for a mortgage for a new build will not be much different than for applying for any other property.
Things to Consider with New Build Mortgages
One thing to consider with new build mortgages is timing, as it plays a vital factor. If the timing isn’t right, your mortgage offer could expire before your home’s ready – something you obviously want to avoid.
Mortgage Offer Periods
Once you’ve received a mortgage offer, it will generally be valid for around six months. It’s important to check the validity period of the mortgage offer as it will differ between providers. If the property hasn’t been completed by the time your mortgage offer expires, you may be given an extension on the offer, but this will depend on the lender.
If anything changes with your new-build that could potentially impact on your mortgage such as a change in its value, the lender has the right to withdraw the offer which can cause a major headache, if you’re already committed to the purchase when the offer falls through, leaving you without a mortgage in place.
Also, if the lender won’t extend your offer, you face having the make your mortgage application all over again – something we aim to avoid. We want to make the process of obtaining your ideal mortgage as easy and stress-free as possible, as we offer a range of products from a comprehensive panel of providers.
Rest assured, there are lenders out there that offer longer validity periods for new build properties. For example, some lenders offer specific new build deals that have deadlines of up to three months longer than their standard deadlines.
Maximum Loan-to-Value (LTV)
Another issue that people face when it comes to new build mortgages, is that lenders limit the maximum percentage of the purchase price that they will lend, especially on flats. However, there are lenders out there that will be more accommodating when it comes to new houses and flats.
More Restrictive Criteria
If you decide to buy a new-build property you may experience more restrictive criteria on the loan than if you were purchasing an older home. Loan-to-value (LTV) is the ratio between the mortgage amount and the value of your property. The higher the LTV, the more risk you pose to the mortgage provider. Mortgage providers are often a lot stricter on the percentage they offer for new-builds in order to protect themselves from devaluation in the early years.
Incentives and Developer Deals
Due to there being a lot of competition between new-build companies, to sweeten the deal some developers may offer incentives to make their properties seem more appealing. These incentives might include:
- Payment of stamp duty or legal fees
- Upgrades to the property you’re buying, such as a higher-spec kitchen or garden landscaping
- Furniture packages
- A contribution towards the deposit
These incentives might seem attractive, however mortgage lenders may take into account any deals that you receive and reflect this in your mortgage offer. Lenders are typically ok with builders’ incentives of up to about 5% of the property value. Higher levels of incentive may be factored into the lender’s calculations by pushing the property purchase value up, which results in your LTV being higher.
Buyer Schemes on New Build Homes
With home-building always on the political agenda, there are schemes available that could make buying a brand new home more affordable, like the Help to Buy scheme.
The Help to Buy scheme could help you to buy a new home with as little as 5% deposit, but you must buy your home from a registered Help to Buy builder.
How Does Help to Buy Work
The Government provides up to a 20% equity loan that comes with no cost within the first five years. The buyer must put down 5% of their own and the remaining 75% of the purchase price can be funded through a mortgage.
The equity loan needs to be repaid eventually and although it’s very low cost even after five years when the property is sold, the same percentage of the sale price will be repayable.
Why Choose us for New Build Mortgages
Whether you’re trying to obtain new build mortgages, for your first home, last home or a buy to let, we are here to help you through the mortgage process and offer sound professional advice.
We will walk you through the complete process and guide you in the most suitable way to finance your dream move.