New Build

When you buy a new build property it is typical for developers to ask for a reservation fee to secure your plot, if you later change your mind about the property, or if the mortgage doesn’t complete on time, you could lose this fee.

The amount of deposit needed varies from case to case, but typically you will need a higher deposit to buy a new build flat than a house. This will usually be at least 10-15% for a Flat, whereas some lenders will consider as little as a 5% deposit for a new Build House.

However it is important to consider the impact of a lower deposit on both your mortgage payments and the risk of negative equity in the future, this is even more evident for New Builds as a premium tends to be built into the purchase.

Ensure you get appropriate advice and complete a full costs exercise to ensure you are selecting the right property and product to purchase with.

Typically when buying a new build property you will have 28 days in which to exchange legal contracts and you must have a valid mortgage offer in place by this time.

Typically mortgage applications will take between 2 to 4 weeks and so it’s important that timescales are factored in when considering suitable mortgage lenders.

If you’re using a mortgage broker, make sure you choose one who can advise you on the best lender to go for to stick to these timescales.

Mortgage offers are usually valid for 6 months on purchases, but sometimes it can take longer than this for the property to be built. Lenders can extend the offer, but will want to recheck the case and might decide not to if circumstances such as income have changed.

Lenders check upfront what kind of guarantee comes with the new build property and need to be happy with the guarantee in order to offer a mortgage.

Many new build properties will come with a ten year NHBC certificate which guarantees the build for ten years, but there are lots of alternatives including guarantee from the developer and the Zurich certificate. as well but it’s important there is some kind of guarantee in place.

Generally with big developers this is fine. Sometimes when you have very small developers they will issue their own guarantee which is ok but it’s important this is checked by the lender upfront to make sure they are comfortable with it.

Often when buying a new build property incentives are thrown in to sweeten the deal. This can be anything from the developer helping with stamp duty or including fixtures and fittings.

Typically mortgage lenders are comfortable with this up to the value of 5% of the property but some lenders will knock this off of the purchase price and so reduce the amount they can lend.

When making the decision about whether to offer a mortgage or not lenders consider the potential re-sale of the property, and the appetite for someone to buy it.

For this reason it can be more difficult to secure mortgages for flats in high rise blocks, or above/next to commercial properties, or in a predominantly owned ex local authority area.

Every property is considered on a case by case basis however and an experienced broker will know which lenders tend to lend on properties with particular characteristics.