Applying for a new build mortgage?
Getting a mortgage for a new build can be tricky especially for flats. Problems can arise with completion time for the new build and this can spiral costs. New builds are especially awkward due to the demands of the property developers. E.g Developers can place strict deadlines on exchange of contracts which restrict lenders from carrying out proper due diligence and eventually leads to the mortgage collapsing.Some lenders expect the exchange of contracts to be concluded within 28 days!
Timing is also a key issue when applying for a new build mortgage. As most new builds aren't completed and you will have to get your new build mortgage early to avoid any delays. The risk then becomes that your mortgage offer(usually valid for 6 months: some lenders will give extensions) will expire before the property is completed or a drastic change in the property e.g its price could mean the lender withdraws its offer.This could then leave you with a situation where you have entered into an agreement to purchase with no means to do so.
Apart from these facts to consider, applying for a new build mortgage is very similar to applying for a mortgage but here are some more key differences to consider which some lenders might impose.
Key facts for New Build mortgages
Maximum LTV: some lenders will only lend up to 75% of the property price. Speak to a qualified digital mortgage broker for specific advice on this.
Developer cashback offers: Some developers will offer cachbacks to reduce the cost on the buyer. Lenders will consider these cashbacks up to a certain amount and make necessary adjustments on how much they loan.
New build mortgage deposit: New build mortgage deposits usually range between 15-20% which means most first-time buyers will have to put a lot down before they can even consider a mortgage. The good news is Government backed mortgage schemes such as the Help to buy equity loan can reduce the amount of deposit a first time buyer will need upfront to 5%.Always seek advice from a digital mortgage broker to see how this scheme might affect you further down the line.
New home build Guarantee: New home build mortgage lenders will expect to see a 10 year NHBC or Zurich certificate guarantee before they lend. Different lenders might have a more lenient or severe requirement. Your digital mortgage broker will know of these and advise you accordingly.
Future resale value: All lenders are concerned about future resale value. Tis is for your sake and for theirs in the case they have to repossess your home and sell it to recoup what you owe them. For this reason lenders will have different criterias on what sort of buildings they will not lend on. E.g buildings in commercial areas
Reservation fee: Some developers might as for hundreds if not thousands of pounds in reservation fee to hold the building for you. If you fail to close on the building you may lose your reservation fee.
Shared ownership New builds: Shared ownership is not available on all new builds so do get in touch with your local authority who will provide more guidance.