New Build

As specialists in new build property mortgages our expert advisers understand the complexities of how the new build property market works. It has systems that do not cross over with any other form of mortgage lending.

There are also pitfalls that a lot of new build property buyers can fall into if they do not understand the process in its entirety.

New build developers have requirements that need to be met by you, the buyer, along the way and failing to meet these could have serious consequences on your purchase.

Our advisers will outline these and be on hand to guide you throughout the purchase.

You need to be organised if buying a new build

Developers will often insist upon demanding timescales, and once you’ve put down a reservation fee you may have only 28 days to exchange contracts. This can be a challenge for mortgage lenders who may struggle to complete your application through to formal offer within the required timeframe.

The best way to counter this is to be prepared and ready to submit your mortgage application. Our mortgage brokers will use their experience to guide you to not only the cheapest lender, but also one who is likely to meet the exchange deadline.

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Having an Agreement in Principle can be invaluable proof that your finances are organised.

Mortgage offer periods

Buying a new build off plan (before it’s built) shouldn’t present any problems in itself when getting a mortgage as most lenders are familiar with this scenario. There may however be an issue around how long your mortgage offer is valid for. It varies by lender but most are only valid for six months. In other words you have six months from mortgage offer date to complete on your home purchase.

If as time goes on you think your new home isn’t going to be ready within that time you may be able to get the lender to extend the offer, but in most cases your mortgage application will need to be reassessed and underwritten.

Recognising that many new build projects can be subject to delays, some lenders have special new build mortgage products with a longer offer period. The best thing to do is check with our mortgage brokers as they know the products which will remain valid for longer and will also be on hand should you need to move quickly to re-apply or find an alternative lender.

Developer Incentives

Some property developers advertise incentives such as having your stamp duty or legal fees paid to set their development apart from others.

It’s worth noting that lenders will take account of any builder incentives such as paying legal fees, stamp duty or cashback when considering your mortgage. If the incentive is worth up to 5% of the value of the property, there should be no issue.

If they exceed this level, 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 LTV, impacting your mortgage rates.

How your property type can impact your mortgage borrowing?

Mortgage lenders are often a lot stricter on the amount they are willing to lend on the purchase of new builds in order to protect themselves from the potential devaluation of the property in the early years.

The loan-to-value ratio for new build mortgages is also often tiered, with lenders prepared to loan you less for a new build flat than a new build house.

This means that if you’re looking for a new build mortgage on an apartment, you may need to be prepared to save up a bigger deposit than if you were buying a house.

The developer insists I speak to their broker, do I have to use them?

Absolutely not, it’s up to you how you arrange your mortgage and you shouldn’t feel obliged to use any particular broker or lender. Even so, developers will often still insist you have a quick conversation to validate your offer, a rather pointless exercise if you have an Agreement in Principle and your application is ready to submit.

Nicholson Brown Limited is authorised and regulated by the Financial Conduct Authority under register number 671013.

Your home (or property) may be at risk of repossession if you do not keep up repayments on your mortgage or loan secured upon it.

We do not charge for our initial consultation, however we charge a brokerage fee for residential and buy to let mortgage applications. The fee is dependent upon the complexity of your case and is typically up to £500, payable upon completion of the transaction.

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