Are you considering buying a new build property? Congratulations! It’s an exciting time, but navigating the world of mortgages can be overwhelming, especially when it comes to new builds. That’s where our ultimate guide steps in to help. In this comprehensive guide, we will walk you through everything you need to know about getting a new build mortgage. From understanding the benefits and challenges of new builds to learning about the different types of mortgages available, we’ve got you covered. We’ll also provide you with valuable tips on how to qualify for a new build mortgage and how to choose the right lender for your needs. Whether you’re a first-time buyer or a seasoned homeowner, this guide will equip you with the knowledge and confidence to make informed decisions throughout the mortgage process. So, let’s dive in and unlock the secrets to getting the perfect new build mortgage!
What are New Build Mortgages?
When it comes to buying a new build property, a new build mortgage is specifically designed to finance the purchase. So, what exactly is a new build mortgage? Essentially, it is a type of mortgage that is tailored to the unique circumstances of purchasing a newly constructed home. Unlike traditional mortgages, which are typically used for buying existing properties, new build mortgages take into account the different factors involved in buying a property that is yet to be completed or has recently been.
There are several key differences between new build mortgages and standard mortgages. Firstly, new build mortgages often have different terms and conditions, as they take into account the specific risks and considerations associated with new builds. For example, the mortgage lender may require additional documentation or inspections to ensure the property meets certain standards before approving the loan. Additionally, new build mortgages may have specific timeframes in which completion will take place and you get the keys.
It’s important to note that not all lenders offer new build mortgages, so it’s crucial to find a lender who specializes in this type of lending. Working with a lender experienced in new build mortgages can make the process much smoother and ensure you have access to the best rates and terms available. Now that we have a better understanding of what a new build mortgage is, let’s explore the benefits it offer
Benefits of Getting a New Build Mortgage
Purchasing a new build property comes with its own set of advantages, and getting a new build mortgage can further enhance these benefits. Here are some of the key benefits to consider
- Lower Maintenance Costs: One of the major advantages of buying a new build property is that it typically requires less maintenance compared to older homes. New builds are newly constructed with warranties in place. They will have new heating systems, boiler and any appliances included will also be new with warranties. They are also usually more energy-efficient due to there being a large focus on this now with new constructions. This can save you money on repairs and maintenance in the long run, making a new build mortgage a wise investment.
- Customised houses: When you buy a new build property, you often have the opportunity to choose some of the finishes, fixtures, and have upgrade options. This often depends how built the property is when you purchase it but can be a nice additional extra. New build properties are also usually painted white providing a blank canvas for your home. This allows you to create a home that truly reflects your style and needs. Making it easier to create your dream home without breaking the bank.
- Warranty Protection: Most new build properties come with a warranty from the developer, which provides added peace of mind. This warranty typically covers any issues that arise during the first few years of homeownership, such as structural defects or faulty appliances. Having this warranty in place can protect your investment and save you money on potential repairs or replacements. A few well known warranties include NHBC, LABC, ICW, Buildmark.
- Energy Efficiency: New build properties are often designed with energy efficiency in mind. They are built to meet or exceed modern building codes and standards, resulting in lower energy bills and a reduced carbon footprint. By choosing a new build mortgage, you can finance the purchase of an energy-efficient home that will help you save money on utility bills and contribute to a greener future. An added incentive we have found is that some lenders will offer exclusive lower rates for EPC A-C rated properties. These come with cash back’s and free valuations in some instances.
These are just a few of the many benefits of getting a new build mortgage. Now, let’s delve into the process of obtaining a new build mortgage and the different types available.
The Process of Obtaining a New Build Mortgage
The process of obtaining a new build mortgage is similar to that of a traditional mortgage, but with a few key differences. Here’s a step-by-step guide to help you understand the process.
- Check you can get a mortgage and the deposit required: Before you start looking at new build properties, it’s important to ensure you can buy the property and have your deposit in place. Lenders will vary on their criteria for new build properties and products available, Certain lenders will require minimum deposit amounts for newbuild flats and houses. Here at Willow Brook Mortgages we have access to over 100 lenders and a wealth of knowledge in new build mortgages. We will talk you through the process and support you from the first enquiry to you getting the keys to your new home. Your advisor will go through your information, discuss your affordability, the deposit required and give you an idea of the monthly payments.
We will also discuss all of the other areas you need to be aware of at this stage such as solicitors costs, stamp duty and the buying process.
- Choose the Right Development: When buying a new build property, it’s essential to choose the right development. Consider factors such as location, amenities, and the reputation of the developer. Visit show homes and research online to get a sense of the quality of the properties and the overall development. This will help you make an informed decision and ensure you’re investing in a property that meets your needs.
- Reserving a property: Once you have chosen a new build property, you will need to pay a reservation fee to secure it. This fee is typically non-refundable but will be deducted from the final purchase price, there is of course usually a cooling off period for peace of mind. This secures the property for you and agrees the purchase price. You will often find with new build properties that you have to wait 3-12 months for them to be ready for you to move in to, the developer will give you an idea of when they expect the property to be ready. This will always be subject to change with weather and building delays. We will ensure your offer has a valid timeframe while you wait.
- Mortgage Application and Valuation: Once you have reserved a property, you can proceed with the mortgage application. At this stage you will call your mortgage broker back to go through the next steps. You will provide all the necessary documentation, including proof of income, bank statements, and your deposit evidence. At Willow Brook Mortgages we will review your documents at this stage to ensure we are finding the right lender for you. We will then research the market, with access to over 100 lenders, we will come back to you with the best overall mortgage deal. Once we have discussed the recommendation with you, we will submit your application across to the lender. We will then support your mortgage application and update you along the way. The lender will also arrange for a valuation of the property to ensure it meets their criteria.
- Mortgage Offer: once the lender is happy with everything, they will issue a mortgage offer. This offer will outline the terms and conditions of the mortgage, including the interest rate, repayment schedule, and any special conditions.
- Exchange of contracts: on a new build property you will usually be expected to exchange contracts within 28 days. At this point you are legally bound to purchase the property and the builder is legally bound to sell the property to you. Your solicitors will request a portion of your deposit at this stage usually 10%, which they will hold until completion. This is an exciting step as it secures everything for you, you have your mortgage agreed and your solicitors have done their due diligence on the house as well.
- Completion: When the property is fully built it will have its final checks by the builder or developer. At this stage the company providing the warranty will also inspect the property to ensure they are happy with everything to sign off the warranty. A lot of builders will invite you to see the property at this point: you will get a walk through of the property and given a guide on how to use common things such as the heating.
Your solicitors will request the funds for your mortgage for the completion day, so all of the money will be paid across to the developer. You now own the property and will have the keys in your hand to start moving in! Keep an eye out for the welcome gift your builder leaves you!
The process of obtaining a new build mortgage may vary slightly depending on the lender and the specific development. However, this general guide should give you a good understanding of what to expect. Now, let’s take a closer look at the different types of new build mortgages available
Understanding the Different Types of New Build Mortgages
When it comes to new build mortgages, there are several types to choose from. Each type has its own advantages and considerations, so it’s important to understand the options available. Here are some of the most common types of new build mortgages:
- Fixed-Rate Mortgage: With a fixed-rate mortgage, the interest rate remains fixed for a set period, typically between 2 to 5 years. This provides stability and allows you to budget your monthly mortgage payments. This is the most common option because it gives you the security that your mortgage payment isn’t going to change each month
- Tracker/variable mortgage: This is the most flexible type of new build mortgage, as the interest rate can fluctuate based on the lender’s variable rate or the bank of England base rate. This type of mortgage often has a lower interest rate but can be more expensive in the long run if interest rates rise
- Shared Ownership Mortgage: Shared ownership mortgages are specifically designed for those who cannot afford to buy a property outright. With this type of mortgage, you purchase a share of the property and pay rent on the remaining share. Over time, you can increase your ownership share through a process called staircasing, usually up to 100% ownership. Your mortgage advisor at Willow Brook Mortgages will be able to discuss this option and the affordability with you further
These are just a few examples of the types of new build mortgages available. Each type has its own pros and cons, so it’s important to consider your financial situation and long-term goals when choosing the right mortgage for your needs. Now, let’s explore the factors you should consider when selecting a new build mortgage
Factors to Consider When Choosing a New Build Mortgage
Choosing the right new build mortgage is a crucial step in the home buying process. Here are some factors that we will consider for you when selecting a new build mortgage:br/>
- Interest Rate: The interest rate is a key consideration when choosing a mortgage. It determines the cost of borrowing and affects your monthly mortgage payments. With access to over 100 lenders we will compare the interest rates offered by different lenders and consider whether a fixed or variable rate mortgage suits your needs
- Mortgage Term: The mortgage term refers to the length of time over which you will repay the full mortgage off. A longer-term may result in lower monthly payments but may also mean paying more interest over the life of the mortgage. We will discuss an idea of monthly payments and your long term goals to establish the right mortgage term for you
- Fees and Charges: Mortgage fees and charges can vary significantly between lenders. These may include arrangement fees, valuation fees, and legal fees. Your advisor at Willow Brook Mortgages will look at the overall cost of your mortgage to ensure the most cost-effective option is chosen for you
- Early Repayment Charges: Most mortgages have early repayment charges if you decide to pay off the mortgage early or switch lenders before the end of the initial fixed-rate period. Some lenders charge a set fee to leave them for the period of your mortgage product where as other lenders will charge a higher rate at the start that reduces each year you are with them
- Lender Reputation: It’s important to choose a lender with a good reputation and a track record of providing excellent customer service. We pride ourselves on our excellent customer service and our reviews on google give you an insight in to our customers experiences. When choosing a lender we believe in finding the best mortgage product but also the right lender for you. When buying a new build property you will usually require your mortgage offer in place quickly so it is important to ensure the lender can work quickly to provide this
- Lenders criteria: This is really important for new build properties. Factors such as how long your mortgage offer will last for, whether a lender will accept any incentives you are being offered by the builder and the warranty on the property are essential in finding the best lender for your new build mortgage. Willow Brook Mortgages have specialist advisors in new build properties with a wealth of experience so we understand lenders criteria to find you the best mortgage.
Now, let’s discuss the importance of your credit score in obtaining a new build mortgage
The Importance of Credit Score in Getting a New Build Mortgage
Your credit score plays a crucial role in obtaining any type of mortgage, including a new build mortgage. Lenders use your credit score to assess your creditworthiness and determine whether to approve your mortgage application. Here’s why your credit score is important when applying for a new build mortgage:
- Loan Eligibility: A good credit score increases your chances of being approved for a mortgage. Lenders consider your credit score, along with other factors such as income and employment history, to determine your loan eligibility. A higher credit score demonstrates responsible financial behaviour and makes you a more attractive borrower
- Interest Rates: Your credit score also affects the interest rate you’re offered on a new build mortgage. If you cannot get a mortgage with a mainstream lender due to having a low credit score or a bad credit history, we will need to look at a specialist lender. Specialist lenders carry higher interest rates which will also increase your payments. By maintaining a good credit score, you can secure a lower interest rate, which can save you thousands of dollars over the life of your mortgage
- Deposit Requirements: In some cases, a lower credit score may result in higher deposit being required. Lenders may require a larger deposit to mitigate the risk associated with a lower credit score. By improving your credit score, you can potentially reduce the amount of money you need to put down as a deposit
To improve your credit score, focus on paying your bills on time, keeping credit card balances low and below 70% of your credit limit, and avoiding unnecessary credit applications. Regularly check your credit report for errors or inaccuracies and address them promptly. By taking these steps, you can strengthen your credit profile and increase your chances of securing a new build mortgage. Now, let’s explore how to save for a deposit for a new build mortgage
How to Save for a Deposit for a New Build Mortgage
Saving for a deposit is an essential step in getting a new build mortgage. While it may seem daunting, there are several strategies you can use to help you save for a deposit more effectively. Here are some tips to consider:
- Set a Savings Goal: Start by setting a realistic savings goal. Determine how much you need to save for a deposit based on the purchase price of the new build property and the loan-to-value ratio required by the lender. Having a clear target will help you stay focused and motivated throughout the saving process
- Create a Budget: Review your income and expenses to create a budget that allows you to save a portion of your income each month. Identify areas where you can cut back on discretionary spending and redirect those funds towards your deposit savings. Consider automating your savings by setting up a direct deposit into a separate savings account
- Explore Government Schemes: Investigate government schemes that can help you save for a deposit. For example, some ISAs allow you to save for a deposit while benefiting from a government bonus. These schemes can boost your savings and help you reach your deposit goal faster
- Reduce Debt: Prioritize paying off high-interest debt, such as credit cards or personal loans, before saving for a deposit. By reducing your debt burden, you can free up more money to put towards your deposit savings. Consider consolidating your debts or negotiating lower interest rates to accelerate your debt payoff
- Consider Additional Sources of Income: Explore opportunities to increase your income, such as overtime at work . Any additional money you earn can be directed towards your deposit savings, helping you reach your goal more quickly
- Family help: Ask any family members who might be able to help if they could gift any money towards your deposit to buy a house. Even a small amount could really help to boost your deposit.
By implementing these strategies and remaining disciplined, you can save for a deposit and take a significant step towards getting a new build mortgage.
If you have any questions or would like to start the process of finding a mortgage click here to contact us today
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