The mortgages team at consumer association Which? sets out some considerations when taking out a mortgage on a new build home…
The rising number of house buyers purchasing a new build home looks set to continue, with a million new homes due to be built in the next few years. If you’re considering taking out a mortgage for a new build home, here are some things you should be aware of, as explained by the mortgage experts at Which?
How long is a mortgage offer valid on a new home?
Usually, mortgage offers on new build homes are valid for around six months. This matters if the new home you want to buy is off-plan (not completed yet). Ideally, you don’t want your mortgage to run out before the new home is ready. This can happen if there is a delay to completing the new build home. In most cases, lenders will happily give an extension to the mortgage, though this shouldn’t be taken for granted. The more time passes, the more chance circumstances could change from when the original mortgage was offered. Although rare, it’s possible this could result in the original offer being withdrawn by the lender. Knowing the completion date of the new build home with as much certainty as possible plus knowing when to accept a mortgage offer are some extra considerations to have when applying for a new home mortgage.
It’s always helpful to contact a mortgage broker or get independent advice. You can ring the Which? mortgage advisors on 0800 316 4182 or alternatively you can receive independent financial advice with new-homes.co.uk.
Getting a new build mortgage with Help to Buy
Buying a new home means you can be eligible for the government-backed Help to Buy scheme. Help to Buy: Equity Loan, for instance, allows new-home buyers to put down an initial 5% as a deposit and then receive a further equity loan of 20% of the property purchase price. This means you could receive a 75% mortgage and the more attractive terms that come with a lower percentage mortgage. However, you may have to shop around since there are a number of major lenders that don’t participate in the initiative.
If you decide you don’t want to use Help to Buy and only have a deposit of around 10% or less, then the first action you should consider taking is seeking independent financial advice or talking to a mortgage broker. They can tell you what your best options are. When it comes to new homes, some mortgage lenders will have restrictions on how much of a mortgage they’ll offer, even more so than with other properties. So, you may only be offered a 75% mortgage and, as such, need to find a bigger deposit.
If you want to talk to a mortgage advisor now regarding a mortgage for a new home, it’s free to call the Which? mortgage advisors on 0800 316 4182. Otherwise, go to our free mortgage advice page for expert help.
How do you apply for a new home mortgage?
Applying for a mortgage on a new build home is essentially not that different from applying for a mortgage on an older property. Most of all, you just need to make sure you time it right and ensure your financial situation is in order. Making sure your credit report/rating is correct and up to date in addition to having as large a deposit as possible will greatly increase your chances of being offered a mortgage.
How to get the best mortgage deal
We advise talking to an independent mortgage advisor because the expert advice you receive can pay off in the long-term. Here‘s a video from the Which? mortgage team explaining what you should look for when choosing a mortgage.
The extra costs that come with buying a new home
Sometimes buying a new build property means paying some extra costs in addition to the usual stamp duty and mortgage fees. For example, often a flat in a new build apartment block can have service charges and ground rent. The more you find out about these types of expenses beforehand, the better.
It’s also advised to have a snagging survey done before you move into your new home. It will identify what needs to be fixed in the property. This can be even more important for a property that has been newly built. You could do it yourself, but having a professional, trained eye look over the property and having a comprehensive snagging list done is well worth the extra few hundred pounds it may cost.