Buying a new build property has unique attractions – modern design, energy efficiency, no chain, and sometimes help with your deposit. But the mortgage process works differently, with specific challenges and considerations.
What Counts as a New Build?
For mortgage purposes, a new build is typically a property that’s either:
- Under construction
- Completed within the last two years
- Never been lived in
Some lenders have stricter definitions. This matters because new build mortgages have different criteria than standard purchases.
Key Differences
Mortgage offers expire – standard offers last 3-6 months. New builds often face construction delays. If your offer expires before completion, you may need to reapply at whatever rates exist then.
Extended mortgage offers – some lenders offer 6-9 month validity specifically for new builds. Others allow extensions. Your adviser can find suitable options based on expected build timelines.
Valuations can be tricky – lenders value new builds cautiously. Developers sometimes inflate prices, and there’s no sales history to compare against. Your mortgage might be based on a lower valuation than the purchase price.
Deposit requirements – some lenders want larger deposits for new builds due to valuation concerns. 15-20% is often preferred over minimum deposits.
Developer Incentives
Developers often offer incentives to attract buyers:
Deposit contributions – the developer pays some or all of your deposit.
Stamp duty paid – developer covers this cost.
Upgrades included – flooring, appliances, landscaping.
Cashback – money back after completion.
These sound attractive, but lenders treat them carefully. Incentives above 5% of the property value typically reduce the amount lenders will advance. The mortgage is based on the true value after incentives, not the headline price.
Example:
- Purchase price: £300,000
- Developer incentive: £15,000 (5%)
- Lender values at: £285,000
- Your deposit needs to cover the gap
Always check how incentives affect your mortgage before committing.
Help to Buy (Legacy)
The Help to Buy equity loan scheme closed to new applications, but some buyers still have existing arrangements. If you purchased under Help to Buy, different rules apply for remortgaging when the interest-free period ends.
The New Build Timeline
- Reservation – you pay a reservation fee (usually £500-£1,000) to hold the property
- Mortgage application – start this immediately to maximise offer validity
- Exchange – typically 28 days after reservation, with a 10% deposit
- Construction – could be weeks or many months
- Completion – often with 10-14 days notice
The compressed timeline at completion catches some buyers out. Be ready to move quickly when the developer gives notice.
What to Watch For
Build delays – very common. Ensure your mortgage offer covers the realistic completion date, not the optimistic one.
Snagging issues – new builds often have defects. Consider a snagging survey before completion.
Leasehold concerns – many new build houses are leasehold with ground rent. Check terms carefully and consider the implications.
Service charges – estates often have management companies with annual fees.
Restrictive covenants – limitations on what you can do with the property.
Finding the Right Mortgage
Not all lenders are enthusiastic about new builds. Criteria vary significantly:
- Maximum loan-to-value accepted
- How incentives are treated
- Offer validity periods
- Attitude to specific developers
A mortgage adviser who understands new builds can navigate these differences and find lenders suited to your situation.
We Can Help
Buying a new build? We’ll find lenders with appropriate offer lengths, explain how incentives affect your borrowing, and guide you through the process from reservation to completion.
Contact SJ Financial Solutions to discuss your new build purchase.
