New build mortgages for first time buyers
If you’re thinking of starting your journey on the property ladder, a new build property can be a great choice for a first-time buyer.
However, these properties can also be quite expensive. So, knowing where you can cut down and better fund your costs will go a long way.
In no particular order, along with explaining to you some ways to reduce your costs, we’ll also explore what constitutes a new build and how off-plan properties differ.
Further, we’ll discuss the benefits and downsides of new build properties. Finally, we’ll cover the negotiation and the step-by-step process of getting a new home.
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Defining new build properties
New build properties have either been newly built within the last two years or have been renovated substantially and haven’t been sold to anyone during that time.
New build properties have strict building regulations, such as snagging clauses. These protect the buyer by compelling the contractor to fix issues caused by poor building work quality.
Compare this to older properties where you may need re-wiring, insulation, and work on the interiors and exteriors.
First-time buyers are often compelled to buy these properties to avoid these issues and stick to higher quality.
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Why purchase a new build property?
New build properties come with quite a few pros for the first-time buyer. The benefits of these properties include:
- More decoration options and possible choices as to where to fit lighting, furniture such as shelves, and décor colours. In the exterior area of your home, you’ll also get to make some choices, such as fitting decking for your garden.
- They’re more energy efficient as new build properties will have improved insulation. Not only will this save you money on energy costs, but it’s also better for the environment.
- Lower overall maintenance costs as new build properties are, and frankly should be, in good condition.
- Many new build properties are often built in the same area. This creates an interesting dynamic where everyone might be considered new in the area.
On top of this, nearly all new build properties come with a National House Building Council, or NHBC, Buildmark, which covers the quality of construction.
This is valid for ten years. Registered properties for NHBC Buildmark can be found on the NHBC website.
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The problems with new build properties
Because new build properties come with an element of risk (due to the devaluation of the property value over time and use), the amount that can be lent on a new build property as opposed to an older one will likely be lower. Read our guide on new build valuations for more information.
These properties come with a “new build premium”, which makes them more expensive than older properties because they’re unused and usually have high-quality construction.
Nationwide, you’ll find that the standard new build mortgage LTV (loan to value ratio) is just 85% for new build houses and 75% for new build flats. This can seem a bit bewildering, so it’s important to get expert advice when you’re seeking a mortgage for a new build property. Please discuss with our friendly professionals for mortgage advice and an idea about what we can offer you.
Some other potential downsides to a new build include:
- New build properties may be subject to delays as they don’t always go according to plan.
- Some new buildings may be packed together, making them much less spacious than older ones.
- These homes lose their purchase price premium once you move in. And after a while, due to occupation, they are no longer considered brand new.
How quickly can I get a new build mortgage?
Depending on the property developer you buy from, you may need to complete your home purchase within a limited time frame. Although, in theory, you should be able to get a mortgage in a day, it can take quite a few weeks.
Contact our lending experts today, and we’ll see how quickly we can help you get your mortgage and get you into your dream home.
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The new build property mortgage process
There are quite a few steps you should first take before requesting a mortgage offer. These include:
- Assessing what you can afford includes determining what incentives you may be able to apply for.
- Deciding on the area and the particular homes you may be interested in. You can typically search online to do this.
- Make sure that the property developer you’re considering buying from is properly accredited and the home appropriately certified. You can then make an offer, but be sure to negotiate where you can.
- Pay the reservation fee to your property developer. Unfortunately, this is normally non-refundable, so make sure you’re certain of your decision.
- Compile the documents you may need for your mortgage, including documents such as your ID and bank statements.
- Contact one of our friendly mortgage professionals, and we’ll help you with the rest of the process.
Can I negotiate the price?
Bear in mind that property developers are giving you an asking price. This is only what they’re offering, and it doesn’t mean you can’t negotiate. Now, whether it’ll be successful or not is dependent on several variables, including:
- The demand for property in the area.
- Where the property is located.
- Whether the property is completed or not.
The last point is very important: the developer might need funding to continue building the property and may be open to negotiating. Aside from this, always research before buying any property, and compare the offered price to those in the area.
If you cannot convince the developer to lower the price, you could always ask if they’d offer some incentives, such as covering your stamp duty. We’ll be covering developer incentives later, so be sure to continue reading.
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How are off-plan properties different?
Off-plan properties are unique in that they’re buildings that either haven’t been completed yet or are still only being planned to be built. There are some complications with purchasing these properties, however.
Your mortgage offer may only be valid for six months or less, and should you not purchase your home during that time, you’ll have to apply again.
Another downside, or potential upside, of off-plan properties is whether the price drops or increases while it’s being built; you’ll still need to pay the purchase price you agreed on. We’ll consider this if you wish to discuss getting your mortgage with us.
How mortgage offers work
Typically mortgage offers last for anywhere from three to six months. The most important thing to do is when reapplying, always make sure that your new mortgage assessment includes any current variables that affect the cost.
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Alternative funding for first time buyers
There are often first-time buyers schemes which you can explore to help fund your new build property. Down payments are expensive, and as a new prospective homeowner, you may not have all that much disposable income.
The property shortage
Because of the national property shortage, the Government pledged to construct 300,000 new build homes each year up until the mid-2020s. These developments, including others, pushed the Government towards creating incentives for purchasing new build properties, such as the ones below.
Help to Buy equity loan scheme
The Help to Buy equity loan scheme lets you put down just a 5% deposit, and then the government will lend you up to 20% of the property cost and even 40% if you’re purchasing in London. And as a bonus, this loan is interest-free for five years. However, you’ll need to secure a 75% mortgage to cover the rest of the cost. That’s where we come in.
As a first-time buyer, you can use this equity loan scheme for new build properties that cost no more than £600 000, which you’ll use as your main residence. Buyers with the intention to buy to let need not apply. This scheme has helped 55,600 households buy their dream homes between 2020 and 2021.
The Help to Buy equity loan scheme will end in 2023 and only applies to official Help to Buy registered homebuilders.
Deposit unlock scheme
Created by the Home Builders Federation, the Deposit Unlock Scheme helps first-time buyers buy new build properties with only a 5% deposit, like with the equity loan. To take advantage of this scheme, you must purchase a home from a house builder participating in the scheme. But, the builder must also use a mortgage from a participating lender.
Contact our mortgage lenders to determine the best mortgage plan for you and to get sound mortgage advice.
Shared ownership scheme
This scheme helps first-time buyers better afford new build properties. This works because you purchase about 50% of the house, but it could be more or less than this, and then pay rent on the other half.
There are a lot of housing associations that may opt to participate in this, so if this is something that interests you should have no problem finding one.
Social homeBuy scheme
This scheme lets eligible tenants of registered providers participate. You can purchase an affordable rented house, either on a shared ownership basis or as a whole.
Start homes scheme
This scheme is for buyers between the ages of 23 and 40. It offers a minimum off of a new build property not worth more than £250,000 or £450,000 in London.
This is on condition that you don’t rent or resell the property at its original value until at least five years after the sale.
New build property developer incentives
Property developers want to make sales and hope to make home-buying more affordable for the average person.
That’s why they may often incentivise their offers, such as offering contributions to your deposit, paying your stamp duty, or handling your legal fees.
They might also include free upgrades to your new builds, such as bathroom renovations and furniture.
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Concluding thoughts on first time buyer new build mortgages
Now that we’ve covered this topic in detail, we hope that you better understand what options are out there for you. Buying a home can be stressful, so we want to ensure that we provide all the information you need to make an informed decision and so that you can make your dream a reality.
While government schemes may help you purchase your home, you will still need a good mortgage to settle the difference. That’s where we come in. Speak to our loan and mortgage lenders to see what we can offer you.
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FAQs
Can you get a first-time mortgage with a new build property?
Yes, you can get a first-time mortgage with a new build property. Use this new build mortgage calculator to get indicative rates.
However, the offer you get will not be as good as if you had purchased a property before. And new build properties devalue over time, so that’s also factored in.
How much deposit do I need for a new build mortgage?
The amount of deposit you’ll need for a new build mortgage is left up for discussion. However, you’ll typically need to make between a 10% and 5% deposit.
Can you get a 90% mortgage on a new build property?
While not impossible, securing a 90% mortgage on a new build property, especially as a first-time buyer, will be challenging to say the least.
Contact us for help with your new build FTB mortgage
Our seasoned new build mortgage lenders are ready and able to help you with any questions or concerns about taking out your first mortgage.
We know this is a big decision, so please don’t hesitate to contact us on 0808 301 9509.
We can offer helpful mortgage advice before you make your choice.
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