What are new build mortgages, and how do they work?

A new build home is a property that has recently been built and hasn’t been lived in yet. These homes are sometimes sold “off-plan,” meaning buyers commit to purchasing the property before construction begins or while it’s still being built. Buying a new build home, especially if it’s off-plan, can make the mortgage process more complicated than buying an older property.

This article will provide information on obtaining a new build mortgage and how Cedibble can offer assistance.

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What are the advantages of new build homes?

Homebuyers are often attracted to newly built properties because they usually come with a 10-year warranty from organizations like the National House Building Council (NHBC) that covers major defects in the building work.

When purchasing a new home, you can select your preferred tiles, carpets, kitchen, and bathroom fittings. In addition, buying a new home means you won’t have to deal with the complexities of a property chain, making the process smoother. Also, new homes are usually more energy-efficient than older ones, resulting in cost savings on gas and electricity bills.

What are the drawbacks to new build homes?

Purchasing a new build property usually comes with a higher price tag than older, similar properties. This is known as the ‘new build premium’. To avoid potential loss in value, holding onto the property for a few years is advisable before considering selling.

Buying a new build property can involve higher up-front costs compared to purchasing an older home. Additionally, you may need to pay a reservation fee to reserve the plot for a specific period. Another potential disadvantage is the risk of construction delays if you buy off-plan, which could result in moving delays.

Securing a new build mortgage

To start purchasing a new build property, it’s recommended to consult a mortgage broker first. They can assist you in determining how much you can borrow and its associated costs. They can also confirm if you qualify for home-buying programs like Shared Ownership. You should inform the lender that you are purchasing a new build since you may need a mortgage designed to deal with a lengthy gap between the exchange and completion.

If you’re not careful, your mortgage offer may expire before your home is ready to move into, requiring you to reapply for a mortgage.

New build buyer incentives

Developers sometimes offer incentives such as paying for your stamp duty or legal fees to attract buyers. However, lenders consider these incentives when deciding how much they can lend you. If the value of the incentive is high, such as over 5% of the property value, it may decrease the amount you are eligible to borrow. This could also affect the mortgage rates you qualify for if it impacts your loan-to-value ratio (how much you’re borrowing compared to the property value).

Once more, you can consult a broker for guidance on how buyer incentives could affect your mortgage.

Once you’ve submitted an offer

To secure your newly built home, you must pay a reservation fee deposit. Some developers have strict deadlines, so you may only have 28 days from the time you pay the deposit to exchange contracts. Therefore, applying for your mortgage as soon as possible is important.

The new build buying process – at a glance

• Step 1 – Contact a broker to determine your borrowing capacity and the deals you qualify for.

• Step 2 – Begin looking for a house.

• Step 3 – Discuss the price and incentives with the builder after locating your desired house. It is recommended to confirm with your mortgage broker once again to ensure that you can afford the final agreed-upon price.

• Step 4 – You can pay a reservation fee to the builder now. Bring the reservation form to your mortgage broker, who will help you find the most suitable option.

• Step 5 – Please apply for the mortgage as soon as possible. The 28-day deadline begins when you pay the reservation fee, so there is no time to waste. Be sure to provide any documents the lender requests, including proof of income and identity.

• Step 6 – Please seek the services of a solicitor.

• Step 7 – Once your mortgage application is approved and the lender completes a survey, they will offer a mortgage. You can then exchange contracts, pay a deposit, and set a completion date. The completion date will likely coincide with the building’s finished construction.

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Frequently Asked Questions

Yes, you can through one of the government schemes: Help-to-buy: Equity Loan Shared Ownership First Homes Mortgage guarantee ¹

The time it takes to get a mortgage for a new build can vary depending on the lender and your circumstances. It can take anywhere from a few days to several weeks. ²

Yes, you will need home insurance to get a new build mortgage. ²

The amount you can borrow on a new build mortgage depends on your income, credit score, and other factors. ³

You start paying the mortgage on a new build when you complete the purchase of the property. ⁴

The Deposit Unlock scheme is designed to help first-time buyers purchase a new-build home with just a 5% deposit. The scheme is available through selected lenders and is backed by the government. ³

There are always pros and cons to every type of home, and whilst there are lots of benefits to owning a new home, there can also be some drawbacks, such as higher prices and potential issues with snagging or defects. ⁵

A mortgage agreement in principle is an initial decision by a lender that they would be willing to lend you money for a mortgage based on some basic information about your financial situation. ²

You don’t necessarily need a mortgage when buying a new-build home, but most people do use one to help finance their purchase. ¹

Yes, there are several government schemes available that can help you with your deposit for a new-build home, including Help-to-Buy and First Homes. ¹ 


(1) Mortgages For New-Build Homes | GoCompare. https://www.gocompare.com/mortgages/new-build-homes

(2) Mortgages for new build homes | Comparethemarket. https://www.comparethemarket.com/mortgages/content/new-build-mortgages

(3) New Build Mortgages – HomeOwners Alliance. https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/new-build-homes-and-getting-a-mortgage-top-tips

(4) Buying a new-build home – Which?. https://www.which.co.uk/money/mortgages-and-property/new-build-homes/buying-a-new-build-home-aLd3a0J659In

(5) New build mortgages | Uswitch. https://www.uswitch.com/mortgages/guides/mortgages-for-new-build-homes

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