Why A New-Build Mortgage Could Be For You

When looking for your first property, a new build home can seem like a natural fit. There are no reminders (good or otherwise) of the previous owners, and some developers even let you choose your furnishings. You get to start from scratch and make the place your own. 

Developers of new builds are known to work to strict deadlines, and will likely want to exchange within 30 days. They can sometimes be more organised than traditional property developers, which is compelling because buying a property can be stressful.

Suppose you get involved with a new build project early enough. In that case, there is the possibility of choosing your fixtures and fittings before you even move in. New build homes tend to be in better condition than older ones, naturally, because everything is new. You can move straight in without the fear of considerable upfront maintenance and repair costs. New build homes are often better insulated and energy-efficient, meaning that they cost less to heat and are less likely to bring unforeseen costs. 

There is no chain because you are buying it directly from the property developer. You are less likely to be disappointed by the common occurrence of breaks in the chain, leading to you losing out on a house you had set your heart on. 

The Help To Buy Scheme

The government’s Help To Buy scheme, exclusively for new-build homes, is designed to help first-time buyers get onto the property ladder. The scheme allows buyers to put down a lower deposit than generally required for a property. The government offers an ‘equity loan’, which will enable you to borrow 20% of the purchase price of a home under £600,000. 

The Rules of Help to Buy:

  1. You need a minimum deposit of 5% of the sale price of your new-build flat or house.
  2. The government lends you up to 20% of the sale price, or 40% if you live in London.
  3. You can borrow the rest, which is 55-75% depending on where you live, as is standard from a mortgage lender. 
  4. The loan is interest-free for five years. You pay a £1 monthly fee by direct debit. 
  5. The loan must be repaid after 25 years, or earlier if you sell the home. 

Drawbacks Of New-Build Mortgages

New-build properties are often much pricier than older homes in the same area. You are paying for all new appliances and property without many of the pitfalls that plague homeowners, like boiler issues and damp. Naturally, there is a premium for this peace of mind. 

If your new home is off-plan (not fully built yet), you are at risk of taking out a mortgage on a house that won’t be finished by your move-in date. Delays in building and construction are common, and your ‘dream home’ may be a building site for longer than promised.

Most mortgage offers from lenders only last for six months. Make sure that when you consider making an offer on a project that is under construction that you aren’t bidding on something that won’t be ready in time. If you run out of time, this can make your offer void, and you can lose out on your ideal home. 

Suppose you receive a mortgage offer while the project is still under construction, and your home falls in value for some reason. In that case, your mortgage offer will remain the same. To avoid overpaying would require re-applying and possibly losing the opportunity for the home you want. 

Securing a mortgage on a new-build is also not as straightforward as you might hope. Because property values of new-build homes can fall in the first few years, lenders often assign a higher interest rate for mortgages on new-build properties.

New-Build Final Thoughts

Knowing that you are the first person to live in your home is a great feeling. New-builds are built with the homeowner in mind and are often well-placed with modern fixtures and fitting. Buying from a property developer instead of an individual is usually smoother and better organised because they are handling many properties of the same kind. Leaving individuals out of the situations also means that you don’t have to worry about a chain, or someone changing their mind. The developers want to sell you the property and are more likely to make it easier for you. However, there are things to consider, like the high interest-rate put on new-build mortgages and the unpredictable factor of securing an off-plan home.

Friends Capital can help you get your first mortgage – contact us today.