Table of Contents
1. Introduction
2. What Are New Build Mortgages?
3. Common Offers and Incentives for New Build Homes
4. Help to Buy Schemes Explained
5. Types of Mortgages for New Builds
6. Challenges of New Build Mortgages
Introduction
Purchasing a new build home is an exciting step, offering the opportunity to move into a brand-new property designed to modern standards. However, buying a new build often comes with specific financial considerations, particularly when it comes to securing a mortgage. From exclusive deals offered by developers to government-backed schemes, there are plenty of options tailored to new build buyers.
In this guide, we’ll explore everything you need to know about new build mortgages, including the types of mortgages available, incentives to buy a new home, and how professional brokers like EHF Mortgages can help you secure the best deal.
What Are New Build Mortgages?
A new build mortgage is a loan specifically designed for purchasing newly constructed homes. These properties are often sold by developers and may include houses or flats that are ready to move into or still under construction.
Key Features of New Build Mortgages:
• Higher Loan-to-Value (LTV) Ratios: Many lenders now offer schemes with smaller deposits, typically with 5%, as a way to achieving home ownership
• Strict Valuation Criteria: Lenders assess the future value of a new build property, considering potential price fluctuations.
• Tied-in Deadlines: Developers may set tight deadlines for completing the purchase, which can affect mortgage approval times.
Common Offers and Incentives for New Build Homes
Developers often provide incentives to encourage buyers, making new builds an attractive option. Here are some of the most common offers:
Deposit Contributions
Many developers offer to pay a percentage of your deposit, reducing the upfront costs of purchasing a home.
Stamp Duty Paid
Some developers cover Stamp Duty Land Tax (SDLT) costs, saving you thousands, particularly for higher-priced properties.
Upgraded Features
New build buyers may receive complimentary upgrades, such as premium kitchen appliances, flooring, or landscaped gardens.
Part Exchange Schemes
If you’re struggling to sell your current home, part exchange schemes allow you to trade in your existing property as part of the purchase price for a new build.
Help with Legal Fees
Developers sometimes cover legal fees or offer discounts for buyers using their recommended solicitors.
While these incentives can make a new build purchase more affordable, it’s essential to consult a broker to ensure these offers align with your financial goals.
Help to Buy Schemes Explained
The Help to Buy scheme was a government-backed initiative designed to make homeownership more accessible for first-time buyers. It is no longer available in England, but it can still be found at Help to Buy Wales (at the time of writing (December 2024)
Here’s how it works:
Equity Loan Scheme
• Available for new build properties only.
• The government provides an equity loan of up to 20% (40% in London) of the property’s value, interest-free for the first 5 years.
• Buyers need a minimum deposit of 5%, with the remaining 75% covered by a mortgage.
Benefits of Help to Buy
• Reduces the amount you need to borrow from a lender, making monthly repayments more manageable.
• Provides access to new build properties that might otherwise be out of budget.
Eligibility Criteria
• Open to first-time buyers in England purchasing a property valued under regional price caps.
• The property must be a new build home from a registered developer.
While the Help to Buy Equity Loan scheme has specific criteria, alternative options like shared ownership may also be available, offering further flexibility.
Types of Mortgages for New Builds
Securing the right mortgage for a new build property depends on your financial situation and goals. Here are the most common mortgage categories:
Fixed-Rate Mortgages
• The interest rate remains the same for a set period (e.g., 2, 5, or 10 years), providing stability in monthly payments.
• Ideal for buyers who value consistency and want to plan their finances without worrying about rate fluctuations.
Tracker Mortgages
• The interest rate follows the Bank of England Base Rate, plus a fixed margin.
• Offers flexibility, with lower rates when the base rate is low but carries the risk of increased payments if rates rise.
Variable Rate Mortgages
• The interest rate is set by the lender and can change at any time.
• Offers flexibility but less predictability compared to fixed-rate mortgages.
Interest-Only Mortgages
• Borrowers pay only the interest each month, with the loan amount due at the end of the term.
• Rarely used for residential purchases but may appeal to certain investors buying new build properties.
95% LTV Mortgages
• Suitable for buyers with smaller deposits, allowing you to borrow up to 95% of the property’s value.
• Often available through government-backed schemes like Help to Buy.
Challenges of New Build Mortgages
While buying a new build has many advantages, it also comes with unique challenges:
1. Valuation Issues
• Lenders may value a new build property lower than the purchase price, requiring a larger deposit to cover the shortfall.
2. Higher Deposit Requirements
• Lenders will require deposits of at least 5%, which can be a barrier for some first-time buyers.
3. Tight Deadlines
• Developers often impose strict completion deadlines, putting pressure on buyers to secure mortgage approval quickly.
4. Limited Lender Options
• Fewer lenders specialise in new build mortgages, so working with a broker is essential to access the best deals.
How EHF Mortgages Can Help
At EHF Mortgages, we understand the unique considerations of buying a new build property. Our team of professional brokers specialises in finding tailored solutions for buyers, ensuring a smooth and stress-free process.
Our Services Include:
1. Whole-of-Market Access
• We work with a wide range of lenders, including those offering competitive rates and specialist new build products.
2. Expert Guidance on Incentives
• We help you navigate developer incentives, ensuring they align with your financial goals.
3. Support with Government Schemes
• From Help to Buy (no longer available in England) to shared ownership, We guide you through the eligibility criteria and application process for any potential incentive schemes available.
4. Timely Mortgage Approval
• Our brokers handle the paperwork and liaise with lenders to meet developer deadlines.
Conclusion and Next Steps
Purchasing a new build home offers many advantages, from modern features to government-backed schemes like Help to Buy (only in Wales). However, securing the right mortgage requires careful planning and expert guidance. By understanding the options available and working with a professional broker, you can make your dream home a reality.
Ready to explore your new build mortgage options? Contact EHF Mortgages today to book a consultation and let us help you secure the best deal for your new home.
