New Build Mortgages
When you are looking to buy a new home, the prospect of owning a new build can seem exciting, but while they are likely to offer fewer issues than older houses, securing a new build mortgage isn’t necessarily a walk in the park. It can, however, be a lot easier if you are clued up on the different factors that differentiate new build mortgages from the rest.
Everyone likes the feeling of having something new, whether it’s new clothes or a new car, and it’s no different when it comes to buying a house. You may assume that as there are no previous owners of a new build house, obtaining a mortgage may be slightly easier. However, there are some important factors to consider before you sign on the dotted line.
Upfront Fees and Deposits
When you are looking to buy a new build, it’s likely that you will have to pay a fee upfront to secure the plot. The fee is non-refundable and there is a danger that you will change your mind about the house – which is the risk you take when you decide to buy a house off plan.
Putting down a deposit is a big factor in any house-buying process and it is no different when it comes to new build mortgages. The amount you have to pay on a new build deposit is likely to vary, but it can be around 15% – 20% of the property’s value. Saving for a deposit is an aspect of house-buying that a lot of people struggle with, particularly if you are looking to buy your first home.
If this is the case, you could receive help through the government’s Help to Buy scheme. Specifically targeted towards new build houses with a price tag of up to £600,000, the Help to Buy scheme can give approved applicants up to 20% of the cost of a newly built home, so you’ll have a reduced deposit amount (5%) and a 75% mortgage to cover the rest. For example, if you had a house worth £300,000, you would need to raise a deposit of £15,000 (5%), the government would then loan you £60,000 (20%) and then you would need a mortgage for the remaining £225,000 (75%).
Offer Expiration Dates
Offers on a new build mortgage tend to only be valid for 6 months – which is something to bear in mind if you are buying off plan or if your house is not yet built. If your offer expires before your house is ready to move into, you could be left with a house to pay for and no form of finance to help. Some lenders do offer longer deadlines on their offers for new build homes, but not all of them do. It’s important you find out exactly how long your mortgage offer stands for and whether this will work for your circumstances – something that we can do for you!
When buying a new build property, it’s likely that you will have 28 days to complete any legal contracts and at this point, you need to have a mortgage in place. Therefore, it’s necessary that you factor in the time it is going to take your new build mortgage to complete and ensure everything will be completed when it needs to be, to prevent any hold ups. Choosing a broker in this instance would be extremely beneficial, as we will have access to a variety of lenders and we can advise you on a lender who will be able to adhere to the necessary timescales.
Quite often with new build properties, a developer will offer incentives that will make their house more appealing to you. This can be anything from furniture packages and contributions towards the stamp duty. Although this may seem great on the surface, your chosen mortgage provider can take this into account when deciding your mortgage rate and you could end up paying a higher rate due to the incentives you received from the developer.
Obtaining a mortgage of any kind can be tricky but with the help of advice from people who know best, the process can often be a lot smoother. As a broker, Maple Leaf Financial has access to the wider market, so we can ensure all of the factors listed above are dealt with by suggesting the most appropriate provider for you. Get in touch with us today.