Looking for the best new build mortgages? Are you considering purchasing a new build property? New build homes are an attractive option for many buyers due to their modern design, energy efficiency, and lack of previous ownership. However, the process of securing a mortgage for a new build is slightly different from that of a traditional property. This ultimate guide to new build mortgages will help you navigate the unique challenges and opportunities that come with buying a new build home.
What is a New Build Mortgage?
A new build mortgage is a mortgage specifically designed for properties that are being purchased directly from a developer. These homes are often not yet fully constructed or have just been completed. Because of the nature of new builds, lenders may apply different criteria when assessing your mortgage application.
Let’s dive into the key aspects of new build mortgages and how to improve your chances of securing the best deal.
1. Get Your Finances in Order Early
When applying for any mortgage, it’s crucial to have your finances in order, but this is especially important with new builds. Developers often have strict deadlines, and the window between reserving the property and completing the purchase can be tight. Here’s what you can do to get prepared:
Check your credit score and resolve any issues.
Save for a larger deposit: New build mortgages may require a higher deposit than standard mortgages, typically 10-25% of the property’s value. Though some lenders will accept a builder’s gifted deposit towards the required deposit usually up to 5%.
Get a mortgage agreement in principle/decision in principle: This will show developers that you are serious about buying and helps to speed up the process.
2. Understand the Mortgage Deadlines for New Builds
New build properties can take several months to complete, and construction delays aren’t uncommon. As a result, most mortgage offers are valid for a limited period, typically 6 months. Some lenders offer extended mortgage offers for new builds, valid for up to 12 months, which can be helpful if there are delays in construction.
Make sure to:
-Clarify the completion timeline with the developer.
-Check the validity of your mortgage offer with your lender to ensure it aligns with the property’s completion date.
If your mortgage offer expires before the property is ready, you might need to reapply, potentially risking changes in interest rates or lending criteria.
3. New Build Mortgage Schemes and Incentives
Many buyers opt for new build homes because of the range of government schemes and developer incentives available. Here are a few key options to consider:
Shared Ownership: Shared ownership allows buyers to purchase a portion of the property (typically 25-75%) and pay rent on the remainder. This reduces the amount you need to borrow initially and can make buying a new build more affordable.
Developer Incentives: Many developers offer incentives to encourage buyers to choose their properties, such as paying for legal fees, stamp duty contributions, deposit contributions or free upgrades like flooring and appliances. Always be prepared to haggle with the builders especially near to their year ends when they have targets to meet!
LISA (Lifetime ISA): see our handy blog post on this topic!
4. New Build Snagging and Warranty
One benefit of purchasing a new build home is that it comes with a 10-year warranty, usually provided by the National House Building Council (NHBC) or similar bodies. This warranty covers any structural issues that may arise during the first decade of ownership.
In addition to the warranty, most new build buyers will go through a snagging process after the home is completed. This is where you check the property for any defects or unfinished work, such as poor paintwork, uneven floors, or incomplete fittings.
Here’s how to manage the process:
Book a professional snagging survey: Professionals can spot issues that you might miss, ensuring that everything is addressed before you move in.
Report snags to the developer as soon as possible to have them fixed before your final handover.
5. Fixed-Rate vs. Variable-Rate Mortgages for New Builds
When choosing a mortgage for your new build, you’ll need to decide between a fixed-rate mortgage or a variable-rate mortgage. Many buyers opt for fixed-rate mortgages for the peace of mind that their monthly payments will remain the same throughout the fixed rate mortgage period.
Fixed-rate mortgages: Offer stability with set interest rates for a defined period (typically 2, 3, or 5 years). These are ideal if you want certainty with your monthly household budgeting.
Variable-rate mortgages: Typically track the Bank of England’s base rate, meaning your payments could fluctuate. These are riskier but may offer lower rates initially.
6. Work with a Specialist Mortgage Broker
Finally, working with a mortgage broker who specialises in new build mortgages can make the entire process much smoother. New build properties come with specific challenges and brokers familiar with the nuances of these purchases can help you navigate them successfully.
Benefits of working with a broker:
Access to exclusive deals: Some lenders offer mortgage deals that are only available through brokers.
Expert advice: A broker can help you find a mortgage that aligns with your financial situation and the property’s timeline.
Time savings: They can handle much of the paperwork and negotiations, allowing you to focus on securing your new home.
Book in to speak to one of our experts now!
Conclusion: Is a New Build Mortgage Right for You?
New build mortgages come with their unique set of benefits and challenges. While new properties are appealing for their modern features and energy efficiency, they often come with tighter deadlines. Understanding the ins and outs of new build mortgages and taking advantage of schemes and incentives can help you secure the best deal.
If you’re ready to explore new build mortgages further, consider reaching out to our trusted fee free mortgage brokers who can guide you through the process and ensure you’re getting the best deal for your new home.
