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New construction mortgage

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 6, 2023

New construction mortgage

Contact our mortgage brokers to find the best mortgage deal for people who require a mortgage to build a home.

Borrowers want to build properties with financing from a build property construction loan, however, this can seem daunting if you don’t have any previous experience.

We work with specialist mortgage brokers in the UK who are experienced in arranging loans for new build properties. We will introduce you to a mortgage lender who will find you the best mortgage offer.

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What is a new construction loan?

A loan for a new construction project allows the borrower to start to build property from scratch. After each stage of construction is complete, the mortgage lender pays the loan directly to the builder.

After the completion of construction, you can expect to start paying your loan back.

What is the process of a mortgage for new home construction?

A builder will tell you how much money it will cost for the new build property. The builder will then break down the total cost by job/stage.

After each stage, an independent verifier will verify that all work has been completed so that your lender can pay your builder.

A few construction loan companies will only charge interest on the monthly amount you take. Once the build is completed, you can start to repay the loan.

Click the link below to find a mortgage deal suitable for you.

Use our online mortgage calculator as a guide for your monthly repayments now

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What’s the difference between a regular mortgage and a loan for new construction?

A traditional residential mortgage is typically required for a borrower looking to buy a property already built at the purchase price.

A new construction loan is usually if you want to build property on your land.

Construction Loan

  • Requirements for 20%-40% down payment
  • To apply, you must have specific building plans (including permission to build), a construction contract and a cost estimate.
  • In stages of construction, loans disbursed.
  • Banks usually issue these documents, although they may not always.
  • With fewer options, getting a mortgage for new construction can be more challenging.
  • Higher interest rates may be applicable

Traditional mortgage

  • Deposit required: 5% to 40% (but this can vary depending on your situation).
  • A bank or mortgage provider may issue a loan.
  • It is easier to approve a mortgage offer, and there are more options depending on your situation.
  • These loans typically have a lower pay interest rate than construction loans.

What’s the process to get a mortgage for a new build property?

Look for a broker that specialises in new build property loans.

It can be a time-saver to work with an experienced mortgage broker that has successfully negotiated under-construction mortgages in the past.

Many brokers claim they are experts in all markets but have little experience in various areas.

This can lead to misinformation and even the rejection of loans for borrowers who have been incorrectly advised.

Click the link below to discuss self-build mortgages. We offer mortgage advice free of charge.

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Verify your credit

It can be beneficial to check your credit score before you apply for any loan.

This will help avoid any unexpected situations and allow you to determine if a lender would accept your application and mortgage deal depending on your credit score.

Each lender uses a different CRA. Some use Experian, others use Call credit, and some use Equifax. It’s worth checking each score to determine if you qualify for most lenders.

Learn how much you are eligible to borrow

We can help you assess the amount you can borrow by partnering with one of our expert brokers, who will introduce you to mortgage lenders.

They will use your credit report to determine how any lender will evaluate your risk as a borrower. Lenders may limit their lending to borrowers with poor credit ratings or complex financial circumstances because they perceive them as riskier.

Your broker will consider your circumstances to determine the maximum amount you can borrow. This will allow them to give an accurate estimate.

This estimate can help you save money on application fees and prevent rejections of your credit file.

Click the link below to speak with a specialist broker. We can help with new build property, purchase price property and any other mortgage you require. We can discuss the monthly interest fee, government loan, equity loan scheme and help to buy equity.

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Pre-approve your application

Your mortgage broker will be able to recommend the most suitable lender once you have determined how much you can borrow.

The lender will look at your credit history, income, deposit size, and age to determine your ability to pay the loan. You can be pre-approved for a loan if you meet their criteria.

Select a builder

Word of mouth is usually an excellent option, or you can read reviews online and see their past work to find a reliable and qualified builder for buying off plan new build properties.

Ask for estimates and narrow your choices to local builders with a track record of completing projects on time and within budget.

After you have selected the participating builders, request them to create a construction plan. You should also ask them to sign a contract that includes the beginning and completion date.

You will also need the builder’s insurance details and work history.

Request a loan for new construction

Send your proposal to the lender who offers you the best rate for your financial situation. This is most likely the lender who has pre-approved the build mortgages.

Before you sign anything, it is essential to be informed about the number of your repayments and when you will have to pay them.

Your mortgage broker will verify these details. Also, ensure that all documents have been signed and sent to the correct authorities. You may have to inform the national house building council.

What are the best mortgage rates available for new construction loans?

We work with brokers who have access to mortgage lenders for new construction in the UK. We can help you find the best rates based on your preferences and circumstances.

Customers who receive a quote via an online calculator for new construction mortgages often feel confused or disappointed. These tools don’t account for many important details.

To fully understand the interest rate you will pay on a new construction mortgage loan, it is essential to get the right advice.

Click the link below to begin your journey.

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Do I need professional advice for the best mortgage lenders?

Yes. A qualified broker can help you find a new construction mortgage that is profitable.

They will take the time to get to know you and your needs to find the best construction mortgage options.

A specialist who is familiar with the best new construction mortgage companies will be able to speed up the process and prevent you from being rejected on your credit report.

Talk to a specialist in new construction loans today

Click the link below; we will find you a mortgage lender whose eligibility criteria you meet. Whether you are looking to build houses, are a first-time buyer, or purchase a new build house, we can help. We can explain the stamp duty, repayments on your mortgage, and any other mortgage queries you may have so contact us now.

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