A newly built home is great. You can immediately invite friends and family over and there is not much that needs doing. However, the mortgage process on a new build is more complex. We take you through the differences and the process to acquire a mortgage.
You can secure your property with the developers before it is even completed. But a mortgage offer is only valid for a limited period, usually six months. If the building takes longer, you may need to get an extension on the bank’s offer. Some lenders take this into account by offering new build mortgages that may extend the time you have to complete taking ownership by an extra three months. Otherwise, you may need to reapply for a mortgage.
Lending Terms for New Build Homes
Your new property is an unknown factor in terms of valuation and this figure may decline in the early years. This means that lenders are inclined to offer smaller loans for new build homes. The loan for a new build house will be slightly higher than for a new build flat. With the latter, you will need to find a bigger deposit.
Property developers often include incentives to attract buyers to new builds. For example, they may pay legal and stamp duty fees for you. This allows the developer to keep the purchase price higher. If perks exceed five percent, lenders may reduce the loan they offer by a similar percentage. On a home with a purchase price of £200,000, this may mean a reduction of £2,000 off the amount they are willing to lend.
We will now look at the actual process to obtain a mortgage on a new build home.
Use this affordability calculator to determine how much of your income is available to pay back a home loan and what amount you can apply to borrow. A good option is to speak to a fee-free broker. They will also be able to tell you if there are any special deals you qualify for. Once you have this information, only then should you start looking for a home to buy.
Check here for 2022 government home buying schemes that you can make use of. These schemes may reduce the deposit you are required to pay. First-time owners may receive a percentage of the value of the home. Using one of these options may allow you to enter the property market.
Choose a Conveyancer
The developer will work with a conveyancer. However, you are free to choose your own. Now you can pay a reservation fee to secure the property you want.
Apply for a Mortgage
You can go through a mortgage broker such as New Build Mortgages which has a quarter of a century’s expertise. They will shop around for the best deals and are available around the clock. Once a lender offers you a mortgage you can pay the deposit.
Buying a new build home is slightly more complicated than purchasing a second-hand property. However, with this guide, the process need not faze you at all.