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There are lots of good reasons to buy a new home but new build mortgages can throw up complications. We take a look at the issues you need to be aware of so you’re in the know from the word go.
New build mortgages are mortgages taken out on a new build home. Lenders will often consider a home to be a ‘new build’ if it has been built in the last two years.
You’ll often need a bigger deposit for new build mortgages than if you’re buying an older property. This is because mortgage lenders are often stricter on the amount they’ll lend on new builds to protect themselves from the risk of the property falling in value in the early years.
You may also need a bigger deposit if you’re buying a new build flat than a new build house.
However, there are some ways to get new build mortgages with a small deposit. For example, if you buy through the Deposit Unlock scheme you can buy a new build home from a participating builder with a 5% deposit – see below for more details.
Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
There are a number of issues you’ll need to consider about new build mortgages, including:
When buying a new build home you’ll often only have 28 days to exchange contracts once you’ve reserved your property. This can be a challenge when it comes to getting new build mortgages because some lenders may struggle to complete your application within that time frame.
So it’s advisable to speak to a mortgage broker to help you find the right mortgage and lender for you.
Mortgage offers usually only last for up to 6 months and this may cause problems if you’re buying a new build home off-plan and you complete after your mortgage offer expires. That’s because while you may be able to get the lender to extend your mortgage offer, in many cases your mortgage application will need to be re-assessed by starting your application over again.
If you can’t get a new mortgage offer, for example, because the value of the property has fallen since exchange, this could cause major problems because when you’re buying a new build you’ll usually be asked to sign a contract agreeing to buy the property at the current advertised price and to pay off the balance at completion.
And if you have to pull out of the purchase because you can’t get a mortgage, you’ll lose your deposit due to breach of contract. You may also be sued by the developer for the difference between the agreed price and the lower price it subsequently achieves at re-sale, as well as any legal fees incurred.
Recognising that many new build projects can be subject to delays, some lenders have special new build mortgages. These new build mortgages have a longer validity period that can be up to three months longer than their usual deadlines. Specialist new build mortgage brokers will know which products will remain valid for longer. Mortgage brokers will also be on hand should you need to move quickly to re-apply or find an alternative lender.
Also, it’s advisable to ask your new build conveyancing solicitor to negotiate writing a ‘long-stop’ completion date into your contract that falls before your mortgage offer expires. So if there’s a delay, it means you can walk away and get a full refund if the developer doesn’t complete your home by that date. Find out more in our guide New build conveyancing explained.
Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
Some housebuilders offer incentives such as having your stamp duty or legal fees paid in order to set their development apart from others.
A developer would often much rather offer an incentive to make the new build premium price more palatable to buyers than reduce the purchase price overall.
However, mortgage lenders will take builder incentives into account when considering your new build mortgage application. If the incentive is worth up to 5% of the value of the property, this typically doesn’t cause problems.
But, if they exceed this point, there could be issues. A lender could still agree to a mortgage, but they may knock the amount that surpasses the 5% point off the purchase price. This can have a significant impact on your loan to value (LTV) and impact your mortgage rates. If you’re unsure about how an incentive could affect your mortgage application, get fee-free advice today.
| Purchase Price | Incentive Value | Typical impact |
| £200,000 | £10,000 (5%) | None |
| £200,000 | £12,000 (6%) | Lenders may take £2,000 off the purchase price when assessing the mortgage |
| £200,000 | Non-cash, e.g. white goods | None |
So what is the new build mortgage process? Here are the steps you’ll need to follow…
Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Lenders will typically lend up to 5 times your annual income, depending on your outgoings and credit history, although some will lend more. The size of your deposit may also be a factor.
To find out instantly how much you may be able to borrow based on your income, try our handy mortgage calculator. And for a more detailed look at how much you’ll be able to borrow on a new build mortgage it’s a good idea to speak to a mortgage broker.
When you’re buying a new build property, you’ll start paying the mortgage after you’ve completed, just like if you’re buying a non new build property.
There are a number of ways of getting new build mortgages with a small deposit including:
Deposit Unlock is a scheme developed by the Home Builders Federation to help first time buyers and home movers buy a new build home with a 5% deposit. However you can only buy a home from a house builder participating in Deposit Unlock and using one of the new build mortgages offered by a participating lender.
For information about Deposit Unlock, participating builders and mortgage lenders, see our advice guide Deposit Unlock explained.
If you want to buy a new build home and you only have a small deposit you may want to consider shared ownership. This is when you buy a share of a property and pay rent on the remaining share. This means you need a smaller mortgage and therefore a smaller deposit. But there are pros and cons to this complicated scheme, so we’d always recommend buying on the open market if you can. Find out more in our guide on Shared Ownership.
The First Homes Scheme lets first time buyers buy a home for 30% to 50% less than its market value when you meet certain criteria (although qualifying properties are very scarce).
The Own New Rate Reducer scheme allows you to buy a new build home with a mortgage and pay a lower mortgage rate than if you buy on the open market with a traditional mortgage. When you choose your property, the developer will agree to contribute 3% or 5% of the purchase price. House builders do this as an incentive for you to buy their properties.
The developer’s contribution goes to your mortgage lender, via Own New. The lender will take the developer’s contribution of 3% or 5% and offset it against the mortgage interest to reduce your monthly payments for the first 2 or 5 years, depending on the length of your initial term. See our guide for more information on the Own New Rate Reducer scheme.
Own New also offers the Deposit Drop scheme, which lets people buy a new build home with a 5% deposit. It launched in the North East and Yorkshire in 2023, with plans to broaden out where it’s available in due course.
Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
There are clear benefits to buying a new build including:
But there are also some downsides:a
If you’re getting a mortgage for a new build you’re buying, make sure you do your research starting with our guide on the Pros and Cons of New Build.
If you’re looking for a new build mortgage, it’s a good idea to get fee-free advice from a mortgage broker. They’ll save you time shopping around and will find the right mortgage for you.
Buying a new build home? Get fee-free new build mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
It can be harder to get a mortgage for a new build but it will depend on your circumstances and the lender’s lending criteria for new build mortgages. If you’re buying a new build it’s a good idea to get fee-free advice from a mortgage broker.
Yes it’s possible to get 95% new build mortgages, such as if you use the Deposit Unlock scheme. But there may be other 95% new build mortgages options available to you so it’s a good idea to speak to a mortgage broker.
When you’re looking online you’ll find most property portals have a new build home filter you can search. For example, Zoopla have a search function dedicated to new builds.
A new build is a home that’s brand new and has never been lived in.
A building or structural warranty is essentially an insurance policy for newly built homes. It’s almost impossible to sell a home without one as all mortgage lenders require a 10 year structural warranty. Although it’s taken out by the builder or developer it is there to protect you, the buyer (and your mortgage lender). This type of warranty typically covers you for defects that arise due to faults in the design, workmanship or materials that remain undiscovered at the time of practical completion on your new build.
These policies are referred to by many different names, including New Home Warranties, New Build Warranties, Structural Warranties, Latent Defects Insurance and Inherent Defects Insurance. Find out more in our guide New home warranties: What they do and don’t cover.
Life insurance isn’t mandatory when taking out a mortgage to buy your new home but it can give financial security to your loved ones if you die while still having a mortgage to pay off. Find our more about life insurance options when taking out a mortgage.
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