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New build homes are properties that have been recently built by a developer. When buying a new build home, you will be the first owner of the property and the first person to live in the property, unless of course you are buying it as a buy to let.
In the UK, there has been a recent flurry of new build activity to address the shortage of available homes and the new build topic is a popular theme of recent Governments. The current Government's Help to Buy schemes were launched in response to the credit crunch and are aimed at buyers who need help to get on the property ladder. The Equity Loan Scheme is one such scheme that was introduced to help buyers of new build homes.
Many homebuyers are drawn by the fact that their home will be brand new and that they will be the first to live in the property. As a new build buyer, you will usually get to choose fixtures and fittings and be able to tailor the way the property is finished to suit your taste.
When buying new build homes, there will be some guarantees provided by the developer to cover things that might go wrong within the first few years as well as a longer term guarantee that any major structural issues will be resolved.
Applying for a new build mortgage is generally the same as applying for a mortgage on any other type of property. However, there are some issues that new build buyers need to be aware of when considering their mortgage options:
Developers usually work to tight timescales and once you have put down the deposit for your home, you will have a very limited amount of time to exchange contracts (often around 21-28 days). It is advised that you are well organised ahead of making your mortgage application so that you have everything ready to help the mortgage lender move the process along as swiftly as possible. See our guide to what you will need when applying for a mortgage.
- Mortgage Offer Periods
Lenders can and do lend off plan for new build homes but mortgage offers are usually valid for a maximum of 6 months. If the property completion date is delayed, you will need to seek an extension from your lender and a reassessment is usually then required which could pose a problem if there has since been a change in circumstances. The lender can change the offer or withdraw the offer altogether.
Some lenders however, do recognise that new build buyers need longer validity periods. For advice about which lenders might be best suited for a new build mortgage, speak with one of our mortgage advisers today.
- Maximum Loan to Value
Some lenders limit the maximum percentage of the purchase price that they will lend on to 75%. This applies more to new build flats as there was an oversupply of flats when the credit crunch hit in 2008. Again, this varies between lenders so it is best to take advice.
- Developer special offers
Property developers sometimes offer cash back as an incentive or offer to pay for significant buyer costs such as stamp duty or legal fees. Lenders will usually take account of these incentives (up to a certain amount) when factoring in how much to lend on new build homes and amy deduct it from their perceived value of the property.
New build homes provide a good option for buyers who are looking for properties that are ready to move into with no work to be done. And with most developers offering guarantees on their developments, new build homes continue to be a popular option in the UK. If you are struggling to get a deposit together, however, then seek advice about what mortgage options there are for you, including the Help to Buy schemes.