New Build Mortgage

Is it hard to get a mortgage for a new build?

No. As with all mortgages, there are various hoops to jump through and a few bits of extra criteria to consider, which we’ll cover later. Ultimately, the process of getting a mortgage for a new build is no simpler or more challenging than securing a mortgage for any other type of property.

What is the new build mortgage process? Any differences here?

There’s no difference in terms of what we actually do, but in the world of new build, things move a bit faster. Typically, you’ll have an exchange deadline – with most builders this is 42 days from the day you reserve. Sometimes it can be as low as 28 days.

You could be looking to complete quite soon if the property is all ready and available, although completion could be a year in advance in some cases, depending on the schedule of the builder in question.

How long does the new build application process take?

I can’t speak for everybody, but we want to try and get you a mortgage offer within 10 working days of the application going into the lender. That’s usually enough with most lenders for questions coming back and forward.

Ultimately, it comes back to preparation for that application. Making sure you’ve got your documentation ready to send over is a really crucial part.

What deposit do I need?

Your absolute minimum is 5%. With a new build property, not a huge number of lenders are available with a deposit that small, although that number is growing on a daily basis.

If you increase that to a 10% deposit, you will open up another myriad of lenders. The same happens again at 15% deposit.

The restrictions are a bit antiquated in my opinion, but essentially if you’ve got a 5% deposit there’s a good chance we’ll be able to find a solution for you, depending on the affordability.

How much can I borrow?

It depends on your income and outgoings, but typically you can borrow four and a half times your income, subject to that affordability assessment.

Some lenders now go up to six times income, depending on your circumstances. Come and have a chat with us to get a specific figure.

The mortgage term has an impact. For example, if you were going for a 10 or a 15 year mortgage term you might find the affordability more restrictive than if you’re going for a 25 or a 30 year mortgage term.

Can you get a five percent mortgage on a new build? Are there any incentives on new builds?

I’m presuming people mean a 5% deposit and a 95% mortgage, here. The short answer is yes, depending on your circumstances.

In terms of incentives with a builder, my advice is to ask for everything but expect nothing. Ultimately, a builder is not under any obligation to offer an incentive.

With financial incentives, lenders typically restrict this to about 5% of the purchase price.
That incentive could potentially be anything: cashback, a contribution towards the deposit, help with your legal costs or for stamp duty. It could be vouchers for purchasing furniture.

One of the newest schemes is Own New, where we can use a builder’s incentive to get you a cheaper mortgage interest rate from a lender, and reducing your bills. Own New is really taking off and getting positive traction in the industry, and we expect to see that particular type of incentive grow [podcast recorded in October 2024].

What other schemes are available on new build properties?

Probably the most well-known one now is Shared Ownership. It does depend on the builder and the site. Shared ownership is usually run and sold by housing associations rather than directly by the builder. But we do deal with some builders that sell shared ownership directly through their sales offices.

Other schemes available would be Deposit Unlock, where the builder pays a percentage to the deposit unlock scheme to give you access to a mortgage with a 5% deposit. It’s not as popular in recent times, because of the growth in lenders offering 5% deposit mortgages regardless.

The last one is the First Home scheme, in conjunction with the local council where you could buy a property at up to a 50% discount. It varies from region to region and builder to builder.
The first step would be to speak to your local council, identify local builders that are partaking in the scheme, and then make an application.

Can I get a mortgage on a new build with bad credit?

Absolutely. It does depend on your circumstances. It will depend on what sort of adverse is registered and when, and if and when it was settled. That will impact which lenders we can approach.

So your situation will inform which lenders are relevant, the interest rates and potentially what deposit you might need. If you do have any form of adverse credit, get a copy of your credit file and come and discuss that with us. We can tell you the likely impact of that adverse credit.

Knowledge is power. The more we know, the better we’re going to be able to help you and the better the quality of the advice you’ll receive.

How do I remortgage my new build property? Any differences here in that process?

Not really. When it comes to the end of a mortgage, you have the same three options as with any other house.

You can move on to the lender’s standard variable rate, which will happen automatically. You don’t have to ask for it. The lender will send you a letter telling you that your payments are changing, and typically standard variable rates are much higher than your current deal.

The second option would be to take a new deal with your existing lender, what we refer to as a product transfer.

Lastly, you could go to another lender if it’s financially viable to do so. We call this remortgaging. We will advise you on the cheapest option from those three, but there could be a reason not to take the cheapest option.

For example, you might want to go onto the variable rate if you’re planning on moving house and don’t want to leave yourself tied into a mortgage. You might find that although it’s cheaper to remain with your existing lender, they may have upset you somehow.

Or, it might be cheaper to remortgage elsewhere – but there’s a little bit more paperwork involved in that. If the savings are very small, the additional hassle of that paperwork may not seem worth it. But we’ll discuss all those options with you. Typically we’ll be in touch with you about six months before your deal ends to discuss everything with you.

What are the pros and cons of new build mortgages?

The first thing is really relevant in modern times – the energy efficiency of new homes. Typically, they will be A or B rated, which means your household bills will be lower.

Also, on an energy efficient home, lenders might offer a slightly better affordability assessment based on those lower bills. They could potentially offer enhanced cashback on the basis of a green property, or a small discount on the interest rate.

With the building itself, typically most builders offer a two-year warranty, backed up by a 10-year warranty from NHBC, or an equivalent company, that covers the structure of the building.

There are also incentives to help with a myriad of things – whether it’s to reduce the Loan to Value by way of a gifted deposit; help with the additional costs of moving home, or as we mentioned, Own New. That could allow you to obtain a cheaper interest rate with a lender registered with the scheme.

I live in a new build house myself, so I’m probably slightly biassed in this regard, but I don’t think there are a lot of downsides. I guess that like buying a new car, there’s a premium on the price, but that’s soon offset – especially if you’re buying from a larger site. Builders are very canny at making sure prices are correct.

Also, the house is a blank canvas. It’s all yours for decorating. I don’t think there are many negatives to a new build property.

What else do we need to know about getting a mortgage on a new build home?

We want to help you and find the best possible deal for your circumstances. The more we know, the more we can help.

If you’re ever unsure about something, come and ask us. If we don’t know the answer, we will know who to ask. We’re here to make life easier and keep the journey running as smoothly as possible.

When we give advice, we will take into account the exchange deadline. When we’re looking at potential lenders, we’re not just looking at rates, we’re looking at the service those lenders offer and whether they’re going to help you meet your deadlines.

Unfortunately, we can’t take away all the stresses of buying a house, but we can minimise them on the mortgage side of things.

YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR PROPERTY. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.