Apply For New Build Mortgages 2024

Key Features

• A mortgage is a loan taken out specifically to buy property or land.
• Mortgage offers generally last 6 months, so it’s important to keep this in mind if you’re looking at a new build property.
• You can get help with mortgages for new builds through things such as shared ownership mortgages and shared equity mortgages.
• Some people find it harder to get new build mortgages than regular mortgages.
• The loan-to-value ratio for new build properties is often tiered.
• You can buy a new build off-plan.

What Is a New Build Property Mortgage?

A new build property mortgage is a type of loan that is taken out to buy newly-built property or land. The mortgage loan is secured against the value of the property or land until it is paid off. If you can’t keep up with repayments, the lender can repossess the property or land, and sell it to get back their funds.

When Should I Apply for a New Build Mortgage?

You should apply for a new build mortgage when your home is nearly finished being built. A mortgage offer generally lasts around 6 months, so you need to factor this in when applying for a new build mortgage. It’s really important to check with your lender how long your offer will last, as they differ lender to lender.

If the new build property is yet to be completed when your mortgage offer expires, there’s no guarantee you’ll be given an extension by your lender. If you are not given an extension, you would have to complete the whole mortgage application again.

Can I Get Help for a New Build Mortgage?

Yes, you can get help for a new build mortgage. There are various ways to secure a mortgage for a new build property. If you are unable to pull together the funds for a deposit on your own, there are several ways you can receive help. Both of these examples are great for lower income households who are looking to get on the property ladder.

Shared Ownership Mortgage:

With a shared ownership mortgage, you only buy a percentage of a property, usually between 25% and 75%, not the entire property. This means that you will only pay a mortgage on the share that you own, and rent on the rest. You’ll have to pay a much smaller deposit than buying a new build outright – usually between 5% and 10% of the value of the share that you are buying.

Shared Equity Mortgage:

For a shared equity mortgage, you’ll need a minimum deposit of 5% of the property purchase price. Also, you’ll need to arrange a repayment mortgage of at least 25% of the property purchase price. You can then borrow an equity loan to cover around 5% to 20% (up to 40% in London) of the property purchase price. Many people pay this back when they come to sell the property.

The government’s Help to Buy scheme is a popular choice for shared equity mortgages, but there’s specific eligibility requirements in order to secure a shared equity mortgage.

Is It Harder To Get a New Build Mortgage Than a Regular Mortgage?

It can seem harder to get a mortgage for new build properties as mortgage lenders are typically on the amount they’re willing to lend for new build properties. This is to protect themselves from the usual devaluation of a property over the early years.

The Loan-To-Value Ratio

The loan-to-value (LTV) ratio for new build properties is often tiered. Lenders are usually less inclined to offer a high loan for new build flats than new build houses. For example, a lender may offer a maximum 75% LTV for new build flats, but a maximum of 85% LTV on new build houses.

If you’re specifically looking for a new build flat, you might have to spend some extra time saving up for the deposit. An alternative to this is to consider a shared ownership mortgage.

What Do I Need To Consider Before Getting a New Build Mortgage?

• Check What You Can Actually Afford – Get in contact with a broker that provides a fee-free evaluation of which mortgages you could be eligible for.
• Decide if You Will Need Financial Help – There’s options if you can’t afford the deposit on your own, such as shared ownership mortgages and shared equity mortgages.
• Research the Builders – It’s good practice to research the builder of the property you’re looking at, check out their reputation!
• Search for the Best Fit for You – Speak to the experts!

What Are the Advantages of Buying a New Build?

There’s several advantages to buying a new build property. If you buy a new build property, you’ll be able to move in straight away when it’s completed. You won’t have to deal with renovations as everything should be brand new. Most new builds are very eco-friendly too, so you’ll be being kind to the planet and your wallet.

In some cases, you may be able to add finishing touches and personalisation as the building is taking place. This lets you have a home that’s better suited to your requirements and tastes. Understandably, these extras would come with some additional costs.

The majority of new-build properties will have a guarantee from the builder, which is usually at least 10 years.

What Are the Disadvantages of Buying a New Build?

There are some disadvantages to buying a new build property over a different property. There’s a higher risk of losing money with new build mortgages. This is because in the short-term, it’s usually a lot more difficult to make money back. If you want to customise your plain new build, you’ll also be looking at extra costs.

With a new build, you’re paying for the bare bones of a property. You’ll likely need to pay extra for higher quality finishes, so it’s really important to see exactly what is included in the cost you are paying.

If you buy a new build, there’s always a chance of delays. From the weather to supply issues, there’s many factors that can cause a build to slow or temporarily stop. If you’re renting in the meantime, you’ll have to spend more money as these issues are resolved.

Can I Get a New Build Mortgage Off-Plan?

Yes, you can get a new build mortgage off-plan. This is where you commit to buying a property before the construction has even started. To buy off-plan, you’ll usually have to pay the builder between 10% and 30% of the properties asking price, and sign a contract agreeing to pay the remainder when the build is complete.

It may be harder to get a new build mortgage off-plan as your mortgage lender will have to organise a valuation by a surveyor. This will be dependent on the property plans and its specifications. Not all lenders will be prepared to offer mortgages on this basis.