There’s a lot to be said for moving into a new-build property. For a start, you get a property that won’t need renovation, refurbishment or repair. And with the buying process generally being chain free, you also get to avoid a lot of drama and heartache. However, arranging a mortgage on a new-build can sometimes be the cause of drama if you aren’t careful, so let’s look at what is involved.
Developers move fast.
Not only are they building properties at a swift pace, they’re selling them in the same way. Once you’ve put down your deposit, you’ll likely only have four weeks to exchange. This means you need to be confident your mortgage can be ready in time. Not all lenders have the ability to work to a developer’s timeframes, so it’s important to choose a product that fits the bill.
Lenders tighten their purse strings when it comes to new-builds.
In the first few years after you move into a new-build, the property will devalue. Although the value will increase over time, this initial drop makes lenders more conservative when it comes to how much they are willing to lend.
The way they balance their risk is through reducing the loan to value ratio. So on a new build, they might offer you a mortgage for 85% of the value of the property. Meaning you’ll have to find the money to put down a 15% deposit. Unless you qualify for the…
Help to Buy scheme 2021.
If you’re a first-time buyer, you can apply for a Help to Buy equity loan from the government. These loans are designed to help you secure part of your deposit on a new home. If you live in England, you can borrow up to 20% of a new build property value, or 40% if you’re buying in London.
In practice, this means you could borrow 10% of the 15% required for your deposit from the government, put the 5% down from your own savings, and get a 75% mortgage on your new-build.
Although you will have to pay your Help to Buy loan back, your debt will be interest free for the first five years.
Negotiating with builders.
Developers sometimes dangle tempting extras to get you to put a deposit down on a property. Things like free legal fees, stamp duty payments, or even cash incentives. It’s all part of the sales process.
Before you agree to anything, speak to Evolve FS. We know how developer firms work, what kinds of deals they have up their sleeves, and how you might be able to push for more extras, and even price reductions, on your new-build property.
Evolve FS are specialist new build mortgage brokers.
If you’re looking to get a mortgage on a new build, Evolve FS’ specialist mortgage team can help you navigate the process with our FEE FREE advice. We’ll look at all the products on the market, and can even access deals you won’t find yourself.
If you’re thinking about buying a new-build, contact us today.