New-build mortgages explained
Sponsored feature | Rachel Zschieschang, Mortgage Advice Bureau
If you are thinking about buying a new build home, it is worth understanding how new-build mortgages work, as the process is slightly different from getting a mortgage on an older house. But don’t worry, it is not drastically different, and we will run through everything you need to know.
What is the definition of new-build?
A new-build property is a home that has not been lived in yet. It may be ‘off-plan’, which means it either hasn’t been built yet or is in the process of being built. Or it may be a newly-built home that is finished and ready to move into but has not been bought yet.
Why you need to be organised
You will often only have 28 days (sometimes less!) to exchange after you have put down your reservation fee. This means you’ll need to move quickly and be organised. One way to get ahead of the game is to speak to a mortgage adviser before you even start looking at houses - knowing which mortgage you need will help speed things up.
Pros and cons of a new-build
Like most things in life, there are always pros and cons to weigh up before deciding if a new-build home is right for you. We’ve put together a list to help you make your decision:
- Peace of mind: Most new-build homes come with a 10-year protection warranty issued by the National House Building Council (NHBC) should there be any major defaults in the building work.
- No upward chain: When you buy a new-build home, you do not need to worry about it falling through because a buyer has pulled out further up the chain. This usually means the process is less complicated.
- Lower energy bills: New-build homes are typically more energy efficient than older houses, so hopefully you will save money on your energy bills.
- Blank canvas: When you move in, it will be freshly decorated and ready for you to put your own stamp on it. You won’t need to worry about ripping out a bathroom suite you don’t like or repainting rooms because you don’t like the colour. And with some new-builds you can choose things like the kitchen, so it’ll be exactly as you want it.
- You will pay a premium: New-build houses are typically more expensive than older homes. This makes them a good investment if you’re planning to live there for a long time, however if you sell after just a few years, you could lose money.
- Reservation fees: Unlike when you buy an older property, most developers will need you to put down a reservation fee to secure your plot.
- Delays: If you choose to buy a home before it has been built, be aware there could be delays in your home being finished that are out of your control.
Housing schemes: what’s available for new-builds?
While doing your research, it’s a good idea to find out what schemes are available to help you secure your dream home. The three main schemes are:
- Help to Buy Equity Loan: The government lends you up to 20 per cent of the value of the house you are buying (up to 40 per cent if in London) You’ll need at least a 5 per cent deposit, and you’ll take out a mortgage for the rest. However, regional price caps apply on the value of house you can buy through this scheme, up to a maximum of £600,000 in London.
- Shared ownership: You buy a share of a house of between 10 and 75 per cent and pay rent on the remaining share. After you’ve moved in, you can buy a larger share of your home. This is known as ‘staircasing’.
- Deposit unlock: This is a new scheme devised between the housebuilding industry and lenders. It allows you to buy a new-build home worth up to £750,000 from participating home builders with a 5 per cent deposit.
Can you help me buy a new build?
Yes! If you are interested in buying a new-build and want to find out more information about mortgages, we have a team of experts to answer all your questions and they will help find the right mortgage for you too. Call us on 07375 886347 or you can visit our website at mortgageadvicebureau.com/cambridge.
Because we play by the book we want to tell you that your home may be repossessed if you do not keep up with repayments on your mortgage. There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances, but a typical fee is up to 1 per cent of the amount borrowed.