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Buying a new-build home

Find out the pros and cons of buying a new-build house or flat, how new-build mortgages work, and whether you're likely to pay more for a new property.

In this article
Why buy a new-build property? What's included in a new-build property? Are new-build prices negotiable? Is there a new-build premium? The process for buying a new-build New-build mortgages
Pros and cons of buying a new-build What schemes can help me buy a new-build? Can I part-exchange to buy a new-build? Are new-builds freehold or leasehold? Get one-to-one mortgage advice on new-build homes

Why buy a new-build property?

To try and tackle the national property shortage, the government is pledging to build 300,000 new-build homes a year by the mid-2020s. 

The government is incentivising buying new-build homes, too - you can buy a new home with a deposit of just 5% and a government loan of between 15% and 40%, depending on where in the UK you live, using the Help to Buy equity loan scheme (it's unavailable in Northern Ireland).

One of the main benefits of buying a new-build property is that, initially at least, it's less likely to require the same level of maintenance that you'd face with an older property. Your energy bills may well be cheaper, too, given that they are usually better insulated than period homes.

If you're buying off-plan (i.e. before it's actually been built), you may also be able to choose certain aspects of the design.

However, there are some disadvantages to buying new-build homes, including the fact that it can sometimes be more difficult to get a mortgage. 

Here we explain the pros and cons of buying a new-build home and how the process works. 

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What's included in a new-build property?

One of the great advantages of buying a brand-new property is that, often, many of the fixtures and fittings you'd otherwise have to fork out for are included in the price.

Exactly what's included varies depending on the developer and what they are offering. You may get stainless steel appliances, washing machines or dishwashers thrown in, as well as wooden flooring or carpet. Others may offer to install flooring or carpet but at an additional cost. 

Developers will often try to upsell you extra items. Be wary here - the price of these could be inflated, and it may be much cheaper for you to source and pay for them yourself.

Today's building rules and regulations mean that there are standards developers have to meet to make your property as energy-efficient as possible, helping you save on bills. Energy-efficient features could include double or even triple-glazed windows, insulated walls, roofs, and doors, and energy-efficient heating.

Are new-build prices negotiable?

Prices for a development's one, two and three-bedroom properties are often plastered all over the hoardings when properties are being built. 

Of course, the developers will tell you that this is the price you'll have to pay - but it is only an asking price, and you should be prepared to negotiate.

The likelihood of success will depend on a number of things, such as where the property is and the level of demand, as well as how far along the development is.

It pays to do your research, looking at sale prices of similar properties nearby via sites like Rightmove and Zoopla or the Land Registry.

If your attempt at getting a discount fails, there are other ways to potentially reduce your costs. You could ask the developer to cover your stamp duty costs or negotiate 'extras', such as flooring or furniture, for free. 

Is there a new-build premium?

You might have heard of the 'new-build premium', a term used to describe the fact that new-build properties tend to be pricier than older, but otherwise similar, properties. The reason for this difference is that everything is new and unused, energy-efficient and built to - hopefully - a high-quality spec. 

Some people believe that, on top of the standard new-build premium, developers have been charging an even greater 'Help to Buy premium' to those using the government's equity loan scheme.

Try to stay level-headed and don't be too wowed by a new-build show home. Do your research, find out about similar properties in the area and on developments, and make sure you don't offer more than you can afford. 

The process for buying a new-build

1. Get your finances in order

Seek guidance from a qualified mortgage adviser about how much you might be able to borrow. That way, you'll know exactly what you can afford before you start going to visit properties that are outside of your budget.

It may be helpful to have a mortgage agreement in principle (AIP) before you start house-hunting, particularly if you're a first-time buyer. It's a document from a mortgage lender confirming that they will, 'in principle', give you a mortgage, which you can use to prove to the developer that you'll be able to afford the property.

A mortgage broker can help you obtain an AIP.

2. Find a property

The next step is to find a development you like the look of. If you're hoping to get a Help to Buy equity loan, you'll need to check that the development is participating in the scheme.

Make sure you research the area, the local amenities and the developer's track record for delivering high-quality properties on time. 

Once you have a clear idea of your price range, it's time to start visiting new-build developments. You'll either be taken around a show home - which will exactly or closely replicate the property you're considering buying if it hasn't been built yet - or, if even the show home hasn't been built yet, a marketing suite.

You can find out how to make the most of your visit and the questions you need to ask in our guide to viewing a show home.

3. Make an offer and pay a fee

If you're keen to buy the property and are confident you can afford the monthly mortgage repayments, it's time to make an offer. This doesn't have to be for the asking price (see Are new-build prices negotiable?, above).

Once you've had an offer accepted, you'll need to pay a reservation fee. This typically ranges from £500 to £1,000 and is usually deducted from the purchase price when you complete.

Be aware, however, that this fee is non-refundable if you decide to pull out.

4. Start working through the legal and financial stuff

So, you're on your way to buying your shiny, new property. Here comes the admin.

You'll need to appoint a conveyancer to deal with the legal side of your purchase. It may be helpful to find one with experience of dealing with new-builds - they'll check that the developer has been given proper planning permission and that the estate has access to all the right services, such as roads and sewers. 

They'll also negotiate the date you can get your keys, and manage the funds to buy the property. 

At the same time, you'll start the process of applying for a mortgage (see New-build mortgages, below), and wait while your lender has the property independently valued.

5. Wait to move in

With a new-build property, you'll exchange contracts months before you move in. This is the point at which you pay your deposit, via your conveyancer.

You'll encounter a bit of jargon when planning your move-in date. 

The first is the 'short-stop' date, which is when the developer expects to finish work, and the second is the 'long-stop' date, which is the date the home has to be completed by.

In theory, the 'long-stop' date is designed to protect you from losing your mortgage offer, as they tend to expire after six months. However, the completion date can, and often does, slip: research by New Homes Review found that over 40% of new-build homes aren't ready by the original deadline.

This is where having a great conveyancer is vital, as they should keep both you and your mortgage lender up to date throughout the process.

Before you move in, make sure you have a snagging survey conducted so that any issues with the property can be identified and fixed as quickly as possible.

New-build mortgages

Getting a mortgage for a new-build home can sometimes be harder than for an older property, as some lenders put stricter limits on the maximum value of a property on which they'll offer a loan. 

This means you might be restricted to borrowing 85% of the value of a new-build house, or 75% on a flat, while lenders may be willing to loan a bigger percentage on an older property.

Timing can also be an issue. Mortgage offers tend to be valid for six months, which can cause a problem if you're buying a home that hasn't been built yet (see buying off-plan) and the projected completion date is further in the future.

Some lenders will consider extending their offers, but this is often subject to reassessing your application. 

A few lenders make mortgage offers for new-build homes that last for longer periods, but these are by no means the norm. An impartial mortgage broker will be able to advise you on this - you can call Which? Mortgage Advisers on 0800 197 8461 for a free, no-obligation consultation if you'd like some help.

Pros and cons of buying a new-build

New-build properties offer the promise of a gleaming new home ready for you to put your mark on - but there are downsides to buying one, too.

Advantages of buying a new-build Disadvantages of buying a new-build
Guarantees: new-build homes come with a 10-year NHBC warranty covering structural defects. Most developers also provide their own two-year warranty. Delays: properties aren't always completed on time. If there's a hold-up during construction, your mortgage offer could expire.
High-spec: new homes are built to the latest specifications, so major repairs should be unnecessary for the first few years. They tend to be more energy-efficient, too, so you could benefit from lower utility bills. Defects: 87% of new-build homeowners reported snagging issues with their properties, according to a survey by New Homes Review. Some developers have also come under fire for poor after-sales care and not fixing problems when they're reported.
Personalisation: if you buy off-plan, you might be able to choose your fixtures and finishes. This is great if you're attracted by the 'blank canvas' element of buying new-build. Vague marketing materials: plans and brochures don't always give a clear idea of what the home will actually look like when it's built.
Smooth process: there's no upward chain to contend with when you buy a new-build home, which means you won't be stuck waiting for someone to sell a property before you can move in. Size: the rooms in new-build homes are often smaller than those in older properties, so you'll need to make sure your belongings will fit. In fact, there's a growing market for 'micro-homes' - properties with a total area of under 37sqm, about the size of an underground tube carriage. 
Incentives: some developers will try and persuade you to buy by offering to pay your legal fees or even your stamp duty - although many first-time buyers are exempt or qualify for a discount on this. Disruption: if you're one of the first to move in, you could find yourself living on a building site for months or even years while the rest of the work is completed.
Schemes: some schemes, such as the Help to Buy equity loan and Starter Homes Initiative, are exclusively available on new-build properties. Teething issues: everything about your home will be new - not just the building, but the infrastructure too. You might have issues with getting the broadband, TV and even heating working, particularly if they will be shared with other properties and you're one of the first in. Getting post delivered can be a nightmare as well.

 

What schemes can help me buy a new-build?

Nearly 160,000 new homes have been bought so far using the government's Help to Buy equity loan and London Help to Buy schemes, which apply exclusively to new-build homes.

Alternatively, if you can't afford to buy a house outright it might be worth looking into shared ownership, which allows you to buy part of a home and pay rent on the rest.

Can I part-exchange to buy a new-build?

Some house builders run part-exchange (PX) schemes, which allow buyers to purchase a new-build home and use their current property as part payment. 

While part-exchange schemes remove the hassle of selling your home the traditional way, there are disadvantages. 

Some developers will offer below the market value, so you should always have your own valuations done by local estate agents before agreeing to anything.

Also, the eligibility criteria can be strict - sometimes you'll only be able to use part-exchange to fund up to 70% of the purchase price of your new home.

For example, if the developer offered £200,000 off the asking price in return for your current property, the price of the new-build home you were buying would need to be at least £285,000.

Are new-builds freehold or leasehold?

If you're buying a flat, it's normal for it to be sold on a leasehold basis - meaning that you own the dwelling but not the land it stands on.

However, in recent years, increasing numbers of new-build houses are also being sold as leaseholds. 

Owning a leasehold property will normally involve paying a ground rent to your freeholder. If you're in a flat, you'll also pay a service charge for the cost of maintaining the common parts of the building and grounds.

New-build leasehold scandal

If you're buying a new-build leasehold property, it's important to check that your lease doesn't include a ground rent doubling clause, which involves the ground rent doubling every decade.

The presence of this clause has led many new-build homeowners to become stuck in unsellable properties, as increasing numbers of mortgage lenders are refusing to lend on homes with this in their leases. 

In June 2018, Which? published a comprehensive investigation into issues surrounding leasehold homes, including ground rent doubling clauses, punitive permission fees, freehold purchasing problems and issues buying and selling leasehold homes.

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