The government has promised to build a million new homes by 2020, making it likely that more and more people will be buying new build properties. In most cases, applying for a mortgage on a new build will be no different from any other property, but there are a few things you should be aware of.
The price
With a new build, you’ll usually pay the price advertised and it’s unlikely that you’ll be able to negotiate. New homes are often considered to be more expensive because, obviously, any fixtures and fittings included are also brand new, and in some cases, you can choose elements within the home which are personal to you – a bit like buying a new car. Be aware that if the first phase of a development sells well a developer may put up the price of the next phase. By the same token, if it sells slowly you may be able to negotiate extras or discounts. You’ll also need to put down an initial deposit to secure your plot, usually £1,000-£2,000.
The timescales
One of the key things to be aware of when buying a new build is that the timescales are incredibly tight. It’s likely that you’ll be expected to exchange within 28 days which can sometimes be a challenge for mortgage lenders. The best thing to do is to make sure you have everything in place for your mortgage application in advance so that you can move quickly once you’ve secured your plot.
The mortgage offer period
New builds can be bought off-plan (before the home has actually been built), but this shouldn’t present a problem for lenders. Mortgage offers are typically only valid for six months though, so be wary if the property is going to take longer to complete. In those cases, there will probably need to be a re-assessment and if there’s been a change in circumstance since your initial application the lender could refuse to extend your mortgage offer. Some lenders do offer longer validity periods, a mortgage broker such as Key Mortgage Advice will recommend the best product for you.
The incentives
It’s less common nowadays, but some developers offer freebies to incentivise buying a house on their development, such as paying your stamp duty or legal fees for you. Lenders will take this into account and it may affect how much they are willing to lend.
Help to Buy
If you’re a first time buyer purchasing a new build, you may wish to consider the Help to Buy scheme. The government will provide a 20 per cent equity loan to help those who are struggling to get a deposit together. You must put down a five per cent deposit, and the remaining 75 per cent will be funded through your mortgage. The loan is interest-free for five years and most lenders will have specific products available for Help to Buy – again, this is something Key Mortgage Advice will help you with.
If you would like to discuss getting a mortgage on a new build property, or how we can help with any mortgage queries, please get in touch.