First Time Buyer New Build Mortgage
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First Time Buyer New Build Mortgage
Gary talks through the new build mortgage process for First Time Buyers.
What are the requirements for getting a mortgage on a new build? Are there any differences for First Time Buyers?
There aren’t really any differences as such. The process is still the same, whether it’s a new build or a standard purchase.
It still comes down to preparation, so you’ll need your proof of ID and address, proof of income, bank statements, proof of deposit and everything else that you might expect when buying a property.
How much deposit do I need for a mortgage on a new build property?
Your minimum deposit will still be 5%. There are a couple of options at 0% but they’re quite niche products.
With a new build property some lenders may require a higher deposit of perhaps 10%, 15%, or even as much as 25% deposit. But your typical minimum remains at 5%.
Can I use government schemes to get a mortgage on a new build?
Yes. There are several schemes that you can use, and they’re not all government led [podcast recorded in July 2024].
The main government scheme is the Mortgage Guarantee Scheme, where effectively the government guarantees a portion of your mortgage on behalf of the lender. Typically that would be charged to the consumer, but the government picks up the tab for you.
It’s not used hugely because there’s still a large number of options available for people with a 5% deposit, and the scheme isn’t required at all if you have a 10% deposit or more.
With the First Home scheme you can potentially buy a property at a discount. There are a limited number of properties available, on a site-by-site basis. You also have the Deposit Unlock scheme where you can access additional borrowing with just a 5% deposit with certain lenders.
There’s also a new scheme called Rate Reducer, provided by Own New. Here, they take an incentive from a new build provider and instead of using that money towards a deposit or internal fixtures and fittings on the house, they pass it to your lender for a cheaper interest rate.
There are a limited number of lenders, so it’s not universally available, but come and talk to us. Tell us if you’re interested in one of those schemes and we’ll look at what’s available.
Can I get a mortgage for a self-build property as a First Time Buyer?
As you might imagine, a self-build mortgage is quite specialist and there are specific ways in which they work. Rather than going into details here, I would encourage anybody looking at a self-build mortgage to get in contact with us and explain what they’re looking to do. We can marry them up to a lender and scheme that might be suitable.
What types of new build properties can I get a mortgage for?
All types of properties. Every lender will have certain criteria on the properties they will or won’t lend on. But as long as it’s for a primary residence and you’re not using more than 40% of it for commercial purposes, there’s no reason why you shouldn’t be able to get a mortgage.
Just be aware that certain house types do attract certain types of restrictions or additional deposit requirements.
What should I consider when choosing a new build mortgage advisor?
Picking a specialist new build advisor is absolutely paramount. With new build properties you really need somebody who understands the lenders’ nuances. We can guide you effectively through that maze.
There have been a number of occasions where, for example, people come to us with a 10% deposit, but the Agreement in Principle they’ve obtained from another advisor isn’t valid for that type of purchase. The lender they used actually required a 15% deposit in order to proceed.
Picking out a specialist will make sure that we get things right the first time, without having to go round in circles.
Are there any special considerations or terms and conditions to be aware of with mortgages on new build property?
Not as such. As with all property purchases, you should do your research. Make sure you’re really comfortable with the type of property you’re buying and it’s within budget.
Look to future-proof yourself as well. Ultimately, we don’t want to be spending lots of money moving house on a frequent basis. Make sure that you understand the costs involved, the type of property that you’re buying and whether there are considerations for anything linked to that property.
A good example is if you’re buying a coach house with a road underneath to a car park at the rear – they’re quite common. Not every lender will lend on that type of property. So be comfortable with the restrictions before you make a commitment to buy a new build property.
What are the benefits and drawbacks of new build homes?
There are a few benefits. One of the big things is that typically a new built property will be more energy efficient. So you don’t have to worry about whether you have to improve a property in the future, as it meets all current standards.
Typically you’ll have a warranty with the property as well. Most builders will cover the property for the first two years and typically there’s a 10 year NHBC or equivalent warranty to look after the property from a structural point of view.
Also, schemes we mentioned can often help with the initial costs of moving house or bringing those monthly costs down.
How long does the mortgage application process for a new build property typically take?
There are no real differences as a First Time Buyer, but as always it comes down to preparation and making sure you have everything ready to go. Listen carefully to what your mortgage advisor tells you, to make sure that you’re in position to be able to move quickly.
One of the things with new build property is there will typically be a deadline to exchange contracts – usually about 42 days. Preparation will make sure we don’t get too near that deadline and keep the stress down as low as possible.
We typically try to get you a mortgage offer within 10 working days. It doesn’t always go quite that smoothly, unfortunately, because everyone’s circumstances are different and we never know quite what a lender might ask us. But our record this year for a mortgage offer is actually 23 seconds.
So things could be a bit longer or they could go quickly. But getting an offer within 10 working days isn’t unreasonable at all.
How else can a mortgage broker or mortgage advisor help?
Talk to us. Share your worries and what’s bothering you. There’s no such thing as a silly question. The only silly question is the one we don’t ask.
We can put your mind at rest. And if we don’t know the answer, we know who to ask or we can point you in the right direction. We have a lot of contacts and knowledge and we’re more than happy to share that with you.
We make sure that the buying process for a First Time Buyer on a new build runs as smoothly and stress-free as possible. Unfortunately buying a house does have its stresses, but we work hard to make things as straightforward as possible.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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