Mortgages for new builds can have some specific considerations compared to traditional properties. Here are some key points to keep in mind:
1. Lender Criteria
- Valuation Issues: New builds can be harder to value, so some lenders might have stricter criteria or require more detailed valuations.
- Deposit Requirements: Lenders might require a larger deposit for new builds, often 10-15% of the purchase price, as the property’s value can be less certain.
2. Types of Mortgages
- Fixed-Rate Mortgages: Offers stability with a fixed interest rate for a set period. This can be helpful in managing monthly payments.
- Variable-Rate Mortgages: Can be cheaper initially but may vary over time, which can impact your monthly payments.
3. Help to Buy Schemes
- Help to Buy Equity Loan: The government loans up to 20% (or 40% in London) of the property’s value, which you repay over time or when you sell the home.
- Shared Ownership: Allows you to buy a share of the property and pay rent on the remaining share.
4. Additional Costs
- Snagging Survey: It’s advisable to have a snagging survey done to identify any issues that need addressing before completion.
- New Build Insurance: Builders usually provide a warranty (e.g., NHBC), but it’s good to check what is covered and for how long.
5. Completion Time
- Build Delays: New builds can sometimes face delays, which might affect mortgage offers. Ensure your mortgage offer is valid for a sufficient period or discuss extension options with your lender.
6. Developer Incentives
- Incentives: Developers might offer incentives like cashback or upgrades. While this can be attractive, make sure they don’t negatively affect the mortgage terms or your financial stability.
7. Long-Term Value
- Resale Value: Consider the long-term value of the property and the surrounding area. New builds can sometimes depreciate faster than older properties.
8. Regulatory Considerations
- Building Regulations: Ensure the new build complies with local building regulations and standards. This can affect your mortgage and insurance.
Steps to Secure a Mortgage for a New Build
- Get Pre-Approved: Secure a mortgage pre-approval to understand your budget and show developers you’re a serious buyer.
- Choose the Right Lender: Some lenders specialize in new builds or offer better terms for them.
- Work with a Mortgage Broker: They can help you navigate the specifics of new build mortgages and find the best deal.