Buying a house New-build homes
Buying a new-build property has a number of pros and cons. Here we explain the process of buying new-build homes and how it affects your mortgage approval chances.
Mortgages for new-build homes
Getting a mortgage for a new-build home, particularly if it's a flat rather than a house, can be trickier than it would be if you were buying an older property. This is because lenders see new-builds as presenting a higher risk, so they require borrowers to put down a bigger deposit to offset this risk.
This means that the maximum proportion of the property's value you can borrow (the loan-to-value, or LTV) may be lower than for an older property. Mortgage providers will typically require a minimum deposit of 10-15% on a new-build house, and 15-20% on a new-build flat.
That said, there are a few companies who will lend more. For impartial advice from our expert mortgage advice service, call Which? Mortgage Advisers on 0808 252 7987. You can also use their mortgage borrowing calculator for a rough idea of how much mortgage you're likely to be able to get.
Help To Buy equity loans
If you've saved up a 5% deposit, the government could lend you up to 20% more through the Help to Buy scheme - enabling you to get a mortgage for 75% of the property's value, which should be a lot easier than getting a 95% mortgage. This form of Help to Buy is only available on new-build homes.
Advantages of new-build homes
- Major repairs and redecoration should be unnecessary for the first few years.
- If the property is registered with the National House-Building Council (NHBC), it’ll come with a 10-year warranty and protection scheme. Find out more on the NHBC website. There are also other companies that provide warranties and insurance for new homes, such as BLP's building defects insurance.
- Help to Buy equity loans are only available on new-build homes, meaning you could buy with a 5% deposit - and this form of Help to Buy isn't restricted to first-time buyers.
- If the house is not yet completed, you may be able to get some features changed to suit your requirements, such as the decor or the position of doors or sockets. However, you may have to pay extra for this and the builder might not agree to undertake any variations until after contracts are exchanged.
- Some new-build developers arrange mortgage facilities for a whole estate in advance. If there's a link between the property developer and a particular lender, this can sometimes make it possible to get a mortgage with a smaller deposit.
Disadvantages of new-build homes
- If you buy the house before it's been completed, you may have to wait for some time before moving in. You can try to get the builder to agree a ‘long stop’ completion date which means they'll be liable to pay you compensation if they don't finish the work by that date.
- There might be nothing more than the site and the plan to show to solicitors and mortgage lenders.
- Most mortgage lenders won’t release the final loan until all the work is completed.
- There are often teething problems, such as cracks produced by dried-out plaster.
- The garden might have to be laid and planted. There may be restrictions on what you can do to the front garden.
- Even in a rising property market you may not make your money back if you have to sell within a year or two.
- You may be required to pay for the new home by staged payments and therefore find yourself borrowing to pay for two houses at once.
Find out more: how to get the best mortgage deal - a range of top tips to help you choose the right mortgage
Energy-efficient new-build homes
New-build homes are often more energy-efficient than older, undeveloped properties.
Always ask to see the property's energy performance certificate to get an idea of its energy efficiency.
It's also worth keeping an eye out for the UK’s new Home Quality Mark (HQM), which is another sign of an energy-efficient property. It is expected that new homes meeting the highest HQM criteria will be up to 50% more energy efficient than existing dwellings in the UK.
Find out more: creating an energy-saving home - how to improve your property and reduce your energy bills
Last updated September 2015.
Which Ltd is an Introducer Appointed Representative of Which? Financial Services Ltd, which is authorised and regulated by the Financial Conduct Authority. Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited. Your home may be repossessed if you do not keep up repayments on your mortgage.