First Time Buyer New Build Mortgage
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James Best explains how new build mortgages work for First Time Buyers.
What is a new build property?
It’s a property that’s currently being built, that is going to be lived in for the very first time. There are some differences – for example, you can have existing properties that have been significantly refurbished, or houses that have been split into flats and occupied for the first time. Many lenders will refer to those as new builds as well.
How do I get a mortgage on a new build property as a First Time Buyer?
There aren’t many differences from any other mortgage, and First Time Buyers will do the same things. They need to work to a budget, save for a deposit, check their credit score and, most importantly, speak to a suitably qualified mortgage advisor – ideally one who is independent and whole-of-market.
What are the requirements for getting a mortgage on a new build?
It’s the same as a ‘secondhand’ mortgage – you need your deposit, a good credit score and to pass the mortgage company’s affordability checks.
One thing that is different to standard purchases for many First Time Buyers is that often with new build properties, the contract exchange comes a lot earlier in the purchase journey.
Traditionally if you’re buying a secondhand property, that comes right at the end. Exchange of contracts is where you pay your deposit, so with a new build you often have to have solicitors, surveys and mortgages ready a lot more quickly.
How much deposit do I need for a mortgage on a new build property?
There are lots of incentives out there for buyers with various developers, but from a mortgage lending perspective, you would need to put a minimum of 5% of your own money into it. It could be money you’ve saved or it could be gifted from a friend or relative.
Can I use government schemes to get a mortgage on a new build?
Unfortunately, with Help to Buy ending, there hasn’t been anything similar to replace that. But if you have a Help to Buy ISA you can get extra uplift with the money that the government adds to your savings as a bonus.
You can also get a Lifetime ISA where, provided you’re not buying a property that’s too expensive, you can use an additional bonus from the government to add to the deposit.
There’s also the First Home scheme which offers a discount off the value of the property on new and resold properties. [podcast recorded in January 2024]
Can I get a mortgage for a self-build property as a First Time Buyer?
Yes, you can, but in all my years I haven’t met many First Time Buyers looking at a self build. You need to have a lot of your own money to purchase or convert a plot of land.
Most self-build applications I deal with are from people who have owned and sold properties before. But nothing in the product details prevents a First Time Buyer doing a self-build mortgage.
Speak To an Expert
Come on in and be quite forward with what you’re after – just be very honest with your mortgage broker. It’s good to make sure that we know absolutely everything about you. That way we can’t be blindsided by a lender. An open book policy is very good when coming to see your mortgage broker.
What types of new build properties can I get a mortgage for?
There are quite a few different types of properties. Developers usually use standard materials to build, but some can be a little bit quirky. If you are looking at something which isn’t built with traditional bricks and mortar with a slate or tile roof, double check with a lender or mortgage adviser.
Anything non-standard, whether it’s steel frames or timber frames or any non-brick construction to the walls, may cause complications for the mortgage company.
How long does the mortgage application process take for a new build property?
For a First Time Buyer it can be quicker, as you wouldn’t have a chain – you haven’t got a property to sell. It could be much quicker to go from start to exchange to finish.
The main factor as a First Time Buyer purchasing a property will be what stage the property is at. You can buy a new build off-plan – which basically means it isn’t built yet. Those purchases will take much longer because you have to wait for the developers to finish the construction.
Those that are already built or on the final fixes can take a much shorter period of time to go through. The contract exchange period for all of those types typically tends to be much earlier on in the process. You have a longer time between exchange and completion, depending on when your build is finished. It does vary, so there’s no definitive answer
What should I consider when looking to get advice on a new build mortgage?
Ideally find someone who is a whole of market broker. They will have access to the largest number of mortgages, and therefore the deal will be the most competitive because you’ll have lots of choice.
It also helps to work with a broker that has good knowledge of the new build process. When you’re dealing with a site that’s being built, you need to understand construction types, build stages, the developer doing it and what incentives are being provided.
Because the potential purchase journey is likely to be quicker, you’re also going to need an advisor who is available to you and can communicate proactively.
Are there any special considerations or terms and conditions I should be aware of with getting a mortgage on a new build property?
There are lots of different sites and they are all unique. Check whether or not there are further developments happening in and around your area. Check what is being built in terms of facilities and amenities.
Will you be paying for the roads or are they adopted? Also, make sure you understand the warranty that you’ve got on your home – which is one of the key benefits of buying a new build.
What are the benefits and drawbacks of new build homes?
Each developer will have their own warranty. With it being new, there could be things that need changing, altering or repairing. Once you’ve first moved, you have good aftercare with the developer and their team.
Because the estate is brand new, there isn’t going to be any data about the area, whereas when you’re looking at secondhand properties there’s a lot of information available about schools, facilities, council tax bandings etc. That information isn’t there for a new build.
Most homes are developed to a high standard with modern materials. They tend to be graded A or B on the energy efficiency register. You also get a NHBC warranty that offers a guarantee against defects within the property – they are typically valid for 10 years. So should something happen due to a defect in the materials, you will be looked after.
From a mortgage perspective there are lots of Green Deals for properties with good EPC ratings – they’ll offer a lower interest rate or cash back. So there is an opportunity to get benefits on your mortgage.
How can a mortgage broker help if somebody is looking into a new build property?
Whether you’re a First Time Buyer, you’re considering moving home, remortgaging or starting to build your deposit to buy a property, get in touch. We’d love to hear from you.
We work with clients all over the country from all different backgrounds – investment buyers, First Time Buyers, people that live and work overseas. We’re able to help and advise everybody.
So if you are considering a mortgage or you just want a bit of help and advice to get you on the right track, speak to myself or a member of the team. We will give you the help and advice you need.
Your home may be repossessed if you do not keep up with your mortgage repayments.