What is NewBuy?
NewBuy is the Government backed ‘mortgage indemnity’ scheme that aims to help people with smaller deposits buy a new build home. It was launched in March this year. At launch thousands of people expressed an interest in using NewBuy and the number of reservations and sales is now rising steadily - see the NewBuy Buyer section for people who have already used NewBuy to buy their new home. The scheme was developed to help the many people who in recent years have been unable to buy their first new home, or move house, because of the large deposits required to secure a mortgage in today’s difficult market.
NewBuy overcomes this so called ‘deposit gap’ by allowing them to get a mortgage with a minimum 5% deposit.
It is aimed at first-time buyers and those who already own a home who only have funds for a 5-10% deposit on the home they wish to buy. The lenders participating in the scheme will provide a 90-95% loan-to-value mortgage for buyers meeting their qualifying criteria. At present Barclays, Halifax, Nat West, Santander and Nationwide are offering NewBuy mortgages. There are now many house builders operating the scheme and they have each joined forces with one of these lenders to offer NewBuy.
NewBuy is available in England on all the properties offered by home builders participating in the scheme up to and including a sale price of £500,000. Separate schemes are currently being developed in Scotland and Wales.
How it works
Only new homes built by house builders signed up to the scheme will qualify, but most major and many smaller builders have now registered or are in the process of registering.
Under the scheme, individual home builders will partner up with one or more mortgage lenders who will offer 90-95% loans on their properties.
New home buyers wishing to take advantage of the scheme will need to qualify for a mortgage with a mortgage lender in the usual way and be subject to the lender’s normal assessment criteria. It is important to note that this does not change a borrower’s responsibility to repay the mortgage in any way.
The scheme will be operated by the home building industry and mortgage lenders – the banks and building societies – working in partnership with the Government. The scheme is designed to protect the lenders against losses in the unfortunate event of repossession, which is why they are prepared to make 90-95% mortgages available.
What to do next
First you need to find out if there are any builders selling NewBuy homes in the area where you want to live.
To do this check the web sites of home builders offering NewBuy – listed under ‘Home builders offering NewBuy’ – which will tell you if they are building in your chosen area, or one of the many commercial property portals. Alternatively pop into the sales office of any home builders building in your area and ask if their homes are covered by the NewBuy scheme.
Once you have found a suitable home that you want to buy, you can either speak to an independent financial advisor who will assess your mortgage requirements and advise you on the best mortgage product for you, or speak directly to a lender participating in the scheme. The house builder will be able to tell you which lender they have a NewBuy agreement with. If a NewBuy mortgage is suitable, the next step will be to apply for a mortgage with the appropriate lender.
The scheme has a few special requirements that you need to be aware of:
- It is available to UK citizens and those with a right to remain indefinitely in the country;
- It covers full home ownership only, so is not available for shared equity or shared ownership;
- It is available for the purchase of a person’s primary home only, so not for second homes or investment or buy-to-let purchases;
- It only applies to capital repayment mortgages, not interest-only mortgages;
- You must not be receiving help with your deposit from a local authority or other public body.
Once you have your mortgage offer and you have reserved your new home, you are on the way to becoming a proud new home owner.
If you are interested in finding out more about the new home sites in your local area offering NewBuy, please refer to your local home builders. The home builders offering NewBuy are listed on this web site under ‘Home builders offering NewBuy’.
Further information on what you need to know when considering a NewBuy mortgage can be found at http://www.cml.org.uk/cml/consumers/newbuy.