With new home completions on the rise, the government says it is beginning to deliver on its promise to get Britain building. But what do you need to know before buying a new-build home?
If you’re a cash-strapped first-time buyer, buying a new-build might seem appealing given the equity loan and shared ownership schemes available on brand-new properties.
In sought-after areas new-builds are also popular with investors seeking a quick profit – and with the government planning to build a million new homes by 2020, it seems unlikely that they will lose their popularity any time soon.
However, buying a new home isn’t always a no-brainer. Before opening that brochure, read on for five things you should be aware of.
- Which? Mortgage Advisers can help you apply for a new-build mortgage and advise on the best lender for your individual circumstances. Call 0808 252 9787 for a free chat with an impartial expert.
1. You could save money by buying a new home off-plan
Buying ‘off-plan’ means purchasing a property that hasn’t yet been completed.
The benefits of buying off-plan can include securing the best plot or getting a discount on the purchase price.
You need to be careful, though. Mortgage offers usually only last for six months, so your agreement could expire while you’re waiting for the property to be completed, leaving you with the unpleasant prospect of losing your holding deposit.
In rising markets, off-plan purchases are often popular with investors who buy multiple units at a discount and sell them on for a profit closer to the completion date. This is called ‘flipping’ and can be a highly risky game, so if you’re planning on investing in this way you should always take independent financial advice before jumping in.
- Learn more in our step-by-step guide to buying off-plan
2. The service charge might be more than you anticipate
You’ve probably already budgeted for stamp duty and mortgage fees, but what about service charges and ground rent?
If you’re buying a leasehold flat you’ll need to pay a service charge for the management of the building, whether it’s a new-build or not. What you’ll pay varies significantly between developments, but could easily be as much as a couple of thousand of pounds each year.
Your mortgage lender is likely to factor this charge into its calculations, so find out exactly how much you’ll need to pay and make sure you can afford it before applying.
- Find out more in our guide to buying a leasehold flat
3. A snagging survey could save you money down the line
Unfortunately, buying a new home isn’t like buying a new toaster, and you might not initially get the perfect property you’d been expecting. In fact new-builds are rarely problem-free, so you should always have a snagging survey done – before you move in if possible.
Snagging surveys are specifically designed for new-build homes and will itemise everything from minor cosmetic issues to serious structural defects. You may not feel like shelling out more money at such an expensive time but having a professional snagging survey carried out will nearly always be money well spent.
While it can be frustrating to find problems with a brand-new home, try not to get too downhearted. Your developer is legally obliged to fix any issues that occur within the first two years, and major structural problems will be covered under the 10-year NHBC warranty.
- Find out about costs, inspection lists and DIY snagging in our full guide to snagging surveys
4. Show homes aren’t all they might seem
Show homes can help you visualise the property you’re thinking of buying, but they’re more carefully engineered than you might expect.
When you walk through the doors, you could find yourself in a house of mirrors (quite literally), complemented by favourable lighting, undersized furniture and top-of-the-range extras that’ll add a few thousand pounds on to the purchase price.
So unless you’re looking for a deal on the show home itself, don’t pay too much attention to this savvy marketing suite. To get a better idea of how your finished home will look, try to view a completed development by the same builder.
- Discover whether you could grab a bargain by buying the show home itself in our guide to show homes
5. House-building was at the forefront of the Autumn Statement
Chancellor Philip Hammond announced two new funds to stimulate house building as part of his Autumn Statement.
A £2.3bn infrastructure fund will go towards building up to 100,000 new-build homes in areas of high demand, while a second fund worth £1.4bn will be used to deliver 40,000 homes for affordable rent, shared ownership and Rent to Buy.
It remains to be seen if these funds will be used to aid the long-awaited Starter Homes Initiative, which promises a 20% discount on new homes for first-time buyers aged under 40.
With communities secretary Sajid Javid set to launch a new White Paper on housing policy before the end of the year, there may be more incentives on the way for people buying new-build homes.
- New-build homes – more advice, the pros and cons plus a step-by-step guide
- Are you ready to be a first-time homebuyer? – ask yourself these key questions
- Shared ownership – learn about an alternative route into home ownership
Your home may be repossessed if you do not keep up repayments on your mortgage.
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