First Time Buyer New Build Mortgage

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First Time Buyer New Build Mortgage

First Time Buyer New Build Mortgage

Kathryn talks us through the new build mortgage process for First Time Buyers.

Podcast approved by The Openwork Partnership on 21/6/2024

What are the requirements for getting a mortgage on a new build?

The requirements are basically the same as for a standard mortgage on a non-new build. There is no real difference between the type of mortgage or what’s needed.

Generally at our initial appointment we would look at affordability, check over your credit profile and then get an Agreement in Principle.

How much deposit do I need for a mortgage on a new build property? Any differences for First Time Buyers?

A few lenders will allow you to purchase a new build with just a 5% deposit, while the majority do want 10% – some will even ask for 15% on a new build.

Since the Help to Buy scheme ended last year, more lenders are coming on board offering 10% deposit on a new build. Some builders offer incentives towards the deposit too.

Can I use government schemes to get a mortgage on a new build?

Absolutely – there are a few schemes you could benefit from when buying a new build, including the First Home scheme, the Discount to Market scheme and the Shared Ownership scheme.

One that’s come out more recently is called the Own New scheme. To get more information on each individual scheme and which would suit you, I would recommend looking online at the new build sites in your local area. See what they’re offering because they will all have different schemes which apply to certain properties.

Can I get a mortgage for a self-build property as a First Time Buyer?

Absolutely. The application process is similar and they do assess affordability to decide how much you will be able to borrow to build a home.

Generally, you would have to purchase the land separately, but there are some lenders that will allow you to use the mortgage to purchase the land too. You would probably need more than a 5% deposit to support you with a self-build, and the mortgage funds are released in tranches throughout the build process.

The lender would release an initial amount, then, once that part of the work is done the lender re-evaluates and then releases the next tranche – and so on.

What types of new build properties can I get a mortgage for?

Generally all new build properties are available to be purchased with a mortgage. But the properties you could buy will depend on your personal affordability.

What should I consider when choosing a new build mortgage advisor?

You could use any mortgage broker to assist you when you buy a new build property. Some new build developers will recommend their own broker, and this can sometimes make our job a little bit more frustrating. We have clients who come and see us for the initial process and we get them an Agreement in Principle.

Then they could go view a new build property and will be advised that they have to be pre-approved by the builder’s broker – but unfortunately that’s just not true. You could use whichever broker you like.

It’s always good to go for someone who’s been recommended to you that’s provided good service before. You should choose someone you connect well with and can build a relationship with. As a broker we always want longevity with our clients. We want to build long standing relationships with our clients and for them to keep coming back over the months and years.

Are there any special considerations or terms and conditions I should be aware of for a mortgage on a new build property?

There could be certain terms and conditions on new builds. For example, if you go for a specific scheme like the Discount to Market there could be restrictions where you have to meet certain criteria to be eligible.

Plus not every lender will accept this, because they see it as a restriction on the title (The title is proof of property ownership and what restrictions if any apply to it.). It could affect the future resale of the property – so that is something to bear in mind.

A restriction on the title and could limit the lenders that you’re able to go to for your mortgage. But again, a broker like ourselves will have all the information and we know which lenders will accept each scheme.

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We’re there to help. There are no silly questions – we like people to ask us about anything and everything that might be going through their mind. 

What are the benefits and drawbacks of new build homes?

I actually have a new build myself – in fact, it’s four years old now, so it’s not that new. I’ve always loved them. They are great because it’s your own blank canvas that you can put your own stamp on.

There are definitely pros and cons to consider. With a new build you may need to spend a little bit more than you realise. A lot of people who probably haven’t looked into it may not know that things like your flooring and tiles aren’t included in the property as standard.

You generally get a percentage of the value of the property towards the purchase as an incentive. You could choose things like upgrading your kitchen, carpets, lighting, tiles and things like that.

But when you buy a non-new build, You’ll almost certainly want to change things when you move in. So it’s just weighing up the options, the costs and the differences in the size of the properties.

You could probably get a little bit more for your money with an older house, but it might need more work. It’s down to personal preference in the end.

How long does the mortgage application process for a new build property typically take?

The mortgage process on a new build is probably quicker than on a standard property as there’s no chain involved. If you’re a First Time Buyer, obviously you’ve got nothing to sell and you’re buying straight from the builder.

Plus, the builder and their solicitor are on the ball. They’re keen to get exchanged as soon as possible. Sometimes, depending on the build stage, they can put a timescale on it. They might expect you to exchange contracts within so many weeks, and at that point you are legally bound to purchase that property.

That’s generally when you will pay your deposit, as well, which is slightly different to buying a non-new build. You could exchange quite some time before you actually complete – the property might not be fully finished when you exchange contracts. That’s something to bear in mind.

How do I get a mortgage on a new build property as a First Time Buyer?

The initial process is the same, regardless of the type of property you buy. We would have an initial consultation where we get all of the information around your needs and desires and look at the credit profile and affordability.

Once you’re happy to get the ball rolling, we would get you an Agreement in Principle, ready for you to look for a property – whether it’s a new build or not. We don’t look at any products until you’ve had an offer accepted or a property reserved – because the market has been so volatile recently [podcast recorded in June 2024].

If it’s a new build and you have reserved a property, certain lenders may offer you a slightly better deal and it’s at that point we would look at your mortgage options.

What else do we need to know about First Time Buyer new build mortgages?

Just that using a broker like ourselves will not only save you time, but it will also save money. It will take the stress away from the mortgage process. We always want to ensure that it’s as smooth as possible, especially when buying a new build.

We guide you through the process and simplify all the mortgage jargon so that you feel fully informed at every step.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Approved by The Openwork Partnership on 21/6/2024

First Time Buyer New Build Mortgage

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