A Which? guide to mortgages for new build homes

Posted 14 July 2016 by Keith Osborne

The Which? Mortgage Advisers team provides a lowdown on the important points of consideration when arranging a mortgage for a brand new home...

With up to a million new homes set to be built over the next few years, more of us will be buying new build homes. But getting a mortgage for a new build property can sometimes be more difficult than for an older home, especially if you’re buying off-plan.

Here, the experts at Which? Mortgage Advisers explain what you need to be aware of when applying for a mortgage on a new build property.

Mortgage offers on new build homes

Mortgage offers are usually only valid for six months, which can cause problems if the property you’re buying isn’t due to be completed until after that point.

While some lenders can make mortgage offers with longer expiry dates, this is by no means standard, and many providers will make you go through a financial re-assessment before deciding whether to extend their offer.

With this in mind, it makes sense to seek guidance from a whole-of-market mortgage broker who can tell you the lenders best suited to your situation.

  • If you’re unsure about which mortgage is right for you, call Which? Mortgage Advisers on 0800 316 4182 for a free, no-obligation consultation.

New build mortgages and Help to Buy

The Help to Buy equity loan scheme allows you to buy a new build home with a 5% deposit.

Sounds great - but there is a downside. While most major mortgage lenders offer products for people using Help to Buy, some still avoid the scheme. This means that you’re likely to be faced with fewer options when applying for a mortgage, and you could miss out on some of the best deals.

Remortgaging once your initial fixed-rate period ends can be tough too, with a limited number of deals out there for people using Help to Buy.

Loan-to-value ratios

If you’ve got a relatively small deposit (10% or less) and you don’t want to use Help to Buy for your new build purchase, it’s also worth taking professional mortgage advice.

This is because some lenders place restrictions on how much they’ll offer to people buying new build properties. If you’re buying a house, you might only be able to borrow up to 85% of its value, and this figure can be as low as 75% for a flat. This means that you might need a bigger deposit than you expected.

  • Talk to a mortgage adviser if you’re unsure about how much you need to save and the best options for you. Call Which? Mortgage Advisers for free on 0800 316 4182.

Applying for a mortgage

Whether you’re applying for a mortgage on a new or an old property, you’ll need to choose the right time and prepare your finances well in advance.

Since the Mortgage Market Review in 2014, lenders have enforced tougher checks on mortgage applicants.

While saving a bigger deposit remains the best way to access better mortgage rates, you can increase your chances of being accepted by giving your finances a health check well ahead of applying and ensuring your credit report is correct and up to date.

Getting the best mortgage deal

The most effective way to ensure you get the best mortgage deal is to speak to a whole-of-market mortgage adviser or broker. In the video below, we explain what you should be looking for when choosing one.

Extra costs when buying a new build home

As well as mortgage fees and stamp duty, there are some other costs you’ll need to budget for if you’re buying a new build property.

If you’re buying a flat, find out what the service charges and ground rent are before preparing your mortgage application, as these can easily add up to a couple of thousand pounds each year. It’s vital to work out whether you can afford these costs before applying, as your mortgage lender will almost certainly include them in its calculations.

Whether you’re buying a flat or a house, you should also have a snagging survey done before moving in. This is the new build equivalent of a traditional house survey, and although it is possible to do it yourself, it’s worth spending a few hundred pounds getting the professionals in. A surveyor will provide a comprehensive snag list, which you can give to the developer so that problems are fixed as soon as possible.

To find out more about the process of buying a home, including the extra costs involved, you can check out the Which? buying a house hub or use our step-by-step guide.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited (registered in England and Wales number 00677665) is an Introducer Appointed Representative of Which? Financial Services Limited (registered in England and Wales number 07239342). Which? Financial Services Limited is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited. Registered office: 2 Marylebone Road, London NW1 4DF.


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