Guide To New Build Mortgages

When buying a house, there are plenty of things to consider, and one of the most important decisions is whether to buy a new build property or an older one. There are upsides and downsides to each property type which I will discuss in more detail later, but one of the important things to note is that new build properties are eligible for a different type of mortgage than older properties.

New-build mortgages are designed to help buyers purchase newly constructed homes. Typically, lenders will offer more competitive rates and terms for new build mortgages compared to older properties. In addition, some lenders may also provide incentives such as cashbackA sum of money paid by the lender to the borrower as an ince... or free legal fees to those who purchase a new build property. In this article on the topic “New Build Mortgages” we will explore this topic in detail and answer frequently asked questions such as

What are new build mortgages?

What are the benefits of purchasing a new build property?

What are the primary drawbacks of new build properties?

What is the process of applying for new build property mortgages?

What are the deposit requirements for a new build mortgage?

What are new build mortgages?

New-build mortgages are financial products designed specifically for the purchase of brand-new properties or properties that have been recently converted or renovated. These properties have never been bought or lived in before and can even be bought off-plan, which means you can secure your mortgage before the property is built.

If you are interested in getting a mortgage for a new property, we would suggest you contact a mortgage broker to help you with your mortgage application process.

What are the benefits of purchasing a new build property?

There are several benefits to owning a new build home. These include:

1. Pristine Condition: As the first owner, you won’t need to worry about any wear and tear or renovation work. Everything is brand new and in perfect condition.
2. Customisation: When buying off-plan, you often have the opportunity to choose fixtures and fittings, allowing you to personalise your home.
3. No Property ChainA sequence of property purchases and sales that are linked t...: Without a property chain, the buying process can be much quicker and less stressful.
4. Energy Efficiency: New builds are designed to meet modern energy efficiency standards, which can save you money on utility bills.
5. Warranty: New builds come with a warranty that covers you for any property defects, giving you peace of mind.

What are the primary drawbacks of new build properties?

Despite the benefits, there are also some downsides to consider:

1. Higher Cost: New builds often cost more than older homes for an equivalent-sized property in the same location.
2. Depreciation: Once you’ve bought it, the property is no longer new, and this can lead to a quicker loss in value.
3. Size: New builds are often smaller than older homes, so you may get less space for your money.

What is the process of applying for new build property mortgages?

The process of applying for a new build mortgage is similar to any other home. However, if you’re buying off-plan, you may need to provide blueprints and images of the property. It’s also important to note that mortgage lenders may be stricter on lending amounts for new builds due to the potential devaluation of the property. We would suggest you contact a specialist mortgage adviser to help you with your mortgage application.

What are the deposit requirements for a new build mortgage?

For new build properties, you can typically expect to put down at least 15% of the property’s value as a deposit. Some lenders may require 20% or even 25%. This is higher than the 5%-10% deposit usually required for standard properties. It is important to note the lender’s criteria change every day, so it is best to speak with a mortgage advisor for the most up-to-date information.

What are some government schemes for new build mortgages in the UK?

There are several government schemes available to help you purchase a new build home. These include the first homes scheme in which you can get 30% to 50%  less than the market value of a new build property. However, we would suggest you contact an experienced mortgage broker to help you with the application process, as these schemes could be replaced or removed.

How Does the Loan-to-Value Ratio Impact First-Time Buyers Interested in New Build Homes?

Why – Loan-to-value is particularly important for first-time buyers looking to get on to the property ladder. Often these buyers are interested in a new build but does not have a large amount to offer as a deposit. This means that they need to seek out a mortgage with a fairly high loan-to-value ratio.

However, unfortunately, some lenders discriminate against new build homes when calculating LTV ratios. It is fairly typical for lenders to offer 90% LTV on a pre-owned home, but if you are buying a new build, you may find that the same lender offers anywhere between 50% and 85%. This is because newly built homes are considered to be more of a risk for lenders as there is statistically a 10% drop in the resale values of new build homes.

Definition of Loan to Value – Loan-to-Value (or LTV for short) relates to how much your mortgage is in relation to the total worth of the property. It is usually expressed as a percentage figure which shows how much of the value if mortgaged and how much is considered equity.

LTV Example – A property which is valued at around £200,000 might have a mortgage of £150,000. The loan-to-value ratio on this particular property would be 75%, while the other 25% represents the £50,000 equityThe difference between the value of the property and the amo....

Types of Warranty and Insurance Policies for New Builds

As previously noted, new build homes often come with a builder’s warranty which lasts anywhere from 1 to 10 years from the completionThe point at which a property purchase is finalized and owne... date and covers structural faults and suchlike. There are also various other types of warranty and insurance which can be used to cover a new build.

New Home Warranty – This is the ‘builder’s warranty’, which is usually provided by the developers and builders of the new build home. It gives a 10-year structural warranty which is a requirement for selling any new build.

Completed House Warranty – When a home is sold which has been built within the past 7 years and for whatever reason does not have a structural warranty in place, then most mortgage lenders will insist on a structural survey being carried out and a new policy put in place.

Structural Defects Insurance – There are occasions when a new build structural warranty becomes void, for example, if the builder goes out of business a year after completing the build and is no longer available to rectify any repairs covered by that warranty. In this case, structural defects insurance can give the homeowner some peace of mind. These types of policies are transferable, so a new homeowner can take them on if you were to sell the property. Other names for structural defects insurance include home defect insurance, latent defect insurance, new home defect insurance and structural warranty.

Self-Build Warranty – Some individuals buy a plot of land and build their own homes. While technically still a new build, the homeowner themselves are responsible for any structural issues that occur. A structural warranty can be obtained by taking out self build insurance.

New Build Flats and Apartments VS. New Build Houses

Once you have settled on choosing a new build, you will then need to choose the type of property, that is – do you want a flat/apartment or a house?

Since many people seeking out a new build are young couples and first-time buyers, an apartment or flat often seems much more attractive. This is becoming even more true at present because so many new build apartments are designed as complexes and gated communities, which are perceived as not only stylish but more secure. However, buyers must beware as these complexes do come with some unique factors that must be taken into consideration.

Flats and apartment buildings comprise of 6 or more individual homes within a single building. This means that there are common areas to be taken care of, including stairwells, lifts, gardens and roofing. All repairs need to be split equally between all of the apartment owners, which can end up being complicated. In most cases, there will be a monthly maintenance fee to cover cleaning and gardening along with minor repairs, but often this does not cover larger structural repairs. This means that if something goes wrong down the line, you may end up liable for your share of the repairs. It is also important to understand that you will have less privacy as you will share a garden and you will have more neighbours than you would in a house.

When purchasing a new build house instead of a flat or apartment, you will have the sole responsibility for maintenance, but you should have the builder’s warranty or structural defects insurance to cover major repairs. You will also have more privacy and freedom. It is important to weigh up the pros and cons of each type of property before making a decision.

Also, for newly built mortgages Industrial Roof Surveys is very important that is carried out by professional roofing contractors, and are used to determine the condition of your commercial roofing or industrial roofing system.

Next Steps

Buying a new build home can be an exciting opportunity, but it’s important to understand the mortgage process and the potential challenges involved. By doing your research and considering all your options, you can make an informed decision that suits your financial situation and lifestyle. We would suggest you contact a mortgage broker to help you with your application process.

FAQs

Can I get a new build mortgage?

Yes, you can take out a new build mortgage to purchase a new build property. The process of getting a mortgage for a new build is the same as any other type of home loan, and the same considerations apply when assessing your eligibility. Mortgage lenders will examine your credit score and income to determine whether you are able to afford the required payments.

It is important to consider all your options and consider the potential risks involved.

What types of new build mortgages are available?

There is a range of mortgage products available for those purchasing a new build. These include standard repayment mortgages, interest-only mortgages, fixed rate and variable rate mortgages. It is important to consider the length of the loan period and the interest rates offered by different lenders. You should also think about any additional fees or charges that may apply.

Are there any special deals available for new build mortgages?

Yes, many mortgage lenders offer special deals for those purchasing a new build. These typically involve lower interest rates or other incentives, such as cashback offers. It is important to compare the different deals offered by different lenders and make sure you understand the terms and conditions before committing to a loan.

Can I get a new build mortgage as a key worker?

Yes, key workers may be eligible for a new build mortgage, depending on their financial situation and credit history. Some lenders may offer special deals or discounts to key workers, so it is worth researching the available options. However, it is also important to factor in any additional costs associated with purchasing a new build home, as well as any other fees or charges that may apply.

Can I get a mortgage on new eco homes?

Yes, you can get a mortgage on new eco homes. Eco-homes are typically more energy efficient, and this means they cost less to heat and maintain over time. Many lenders offer special deals for those purchasing an eco home, such as lower interest rates or cashback offers. It is important to weigh up the potential savings against any additional costs associated with the purchase of an eco home, such as higher mortgage fees or costs related to the installation of energy-efficient appliances.