New Build Mortgages:
Why are they different?

Are there specific mortgages for New Build homes?

Yes, New Builds has its own entire section of the Mortgage Market. Many lenders offer mortgages specifically designed for new build properties. These products are for homes that have never been bought or lived in before. Some lenders may also include off-plan properties or substantially renovated homes in their definition of a new build.

It's important to note that new build mortgages are different from self-build or construction mortgages, which cater to individuals building their own homes.

Deposit requirements

New build mortgages typically require larger deposits than standard properties due to the potential for new homes to lose value once someone moves in. Expect to provide at least 15% of the property's value, with some lenders asking for as much as 20% to 25%. This is considerably higher than the 5%-10% deposit often required for older properties.

5% deposit mortgages are usually only available for houses, not flats, and may come with product restrictions. Always consult your broker at Mortgage One to confirm the latest deposit requirements.

How to get a new build mortgage

Here are the key steps to securing a new build mortgage:

1. Check for home-buying schemes
   Several government-backed schemes allow buyers to purchase new build homes with just a 5% deposit. These include the First Homes Scheme and Deposit Unlock Scheme, which we’ll explore further.

2. Time your application
   When buying off-plan, ensure your mortgage offer’s validity period aligns with the completion timeline. New build offers typically last 9-12 months, compared to 6 months for standard properties, but delays in construction could still lead to an expired offer.

3. Work with a broker
   A broker who specialises in new builds can help navigate complexities, find the best deal, and secure exclusive offers. They can also help ensure that your mortgage offer lasts long enough for your purchase.

Schemes you could consider

• First Homes Scheme: First-time buyers can purchase a new build home at a 30%-50% discount. The discount stays on the property, benefiting future buyers as well. To qualify, your household income must be less than £80,000 (or £90,000 in London). Key workers receive priority.

• Shared Ownership: You buy a portion of the property and rent the rest from a housing association, with the option to buy more shares over time. As you own more of the property, your rent decreases.

• Deposit Unlock Scheme: Developed by the Home Builders Federation, this allows buyers to secure a new build home with a 5% deposit. It replaces the now-closed Help to Buy scheme.

Which lenders offer new build mortgages?

Many high street lenders, offer new build mortgages. Others, specialist lenders can be helpful if your situation is more complex.

Because each lender has different criteria, it’s crucial to consult a broker who can assess your situation and direct you to the best options and the least expensive option for your specific criteria.

What is a typical LTV ratio for a new build property?

Lenders are often hesitant to offer 100% mortgages for new builds. Many cap their loan-to-value (LTV) ratio at 85%-90% for houses and 85% for flats. New builds can be riskier for lenders since there’s no prior history of repairs, and they tend to lose value as soon as someone moves in.

Specialist lenders may even restrict LTV to 80%, and in rare cases, you may find a 100% mortgage, though this is uncommon.

Can you get a buy-to-let mortgage on a new build?

Yes, buy-to-let mortgages are available for new builds, but lenders may ask for a higher deposit—typically around 20%-25%. This is because the property’s rental income and value may not be as predictable as older homes.

Credit checks for a mortgage on a new build

As with all mortgages, a credit check is necessary when applying for a new build mortgage. If you have bad credit, you may still be eligible, but expect to put down a larger deposit (between 15%-30%). Specialist lenders exist to help borrowers in this situation.

Using a Mortgage Broker

Securing a new build mortgage can be complex, but Mortgage One can help. Mortgage One are highly experienced specialist Mortgage Brokers. Contact us anytime for a no-obligation conversation.  Call us today on 01202 155992 or contact us here.