This week, Craig is joined by Jamie Ben, Mortgage Adviser at CS Mortgage Solutions to discuss new build mortgages.
What’s the best way to find new build properties to buy?
Some developers do use the online portals like Rightmove to showcase their homes, but you won’t find every property there. A lot of developers will put one or two listings online, but there’s a lot that goes on behind the scenes – many properties are sold off plan before anything’s even been built.
So if you hear about a new development that sounds interesting, I would always recommend getting yourself down to that site – there will be a negotiator based there who will know everything about it.
So once I’ve found a property I like, what’s next?
The best bet of all is to see a Mortgage Adviser before you even visit the site. That way we can do a few checks and set your mortgage affordability. Then you can visit the housing site and tell them exactly what your budget is, along with your requirements for a home.
You’re much more likely to get the negotiator on board this way – they know you’re a serious buyer, and they’re going to do everything possible to sell you the property. Your Mortgage Adviser can also help you decide what to offer.
The next step depends on how you’re planning to buy – for example, if you’re looking at Shared Ownership we need to send off a form to the Housing Association to get you approved. We also need to have your proof of deposit funds verified.
How do I reserve the new build home?
When you buy a new build home you either purchase off plan, or you buy a ‘build complete’ property. If it’s off plan you need to understand the wait time for the completion of the property. If the build is complete, then it’s a quicker process in terms of verification and moving forward.
Either way, the process is that you prove your identity and your address, and provide a valid mortgage Agreement in Principle along with proof of deposit funds. Once your offer is accepted, the property is allocated to you and you ask for it to be taken off the market.
Being able to move fast is very important, as new developments get a lot of attention and it can be very competitive to get the house you want.
Do I have to pay a fee to reserve a new build home?
Yes, there’s normally a reservation fee which will vary depending on the property price and the plot that you’re looking at. The usual figure is up to around £1,000, unless you’re looking at a high value property of more than £250,000.
What sort of incentives do developers offer?
Cash incentives are a no-no and would be flagged up as inappropriate by a Mortgage Lender. Things that are acceptable and pretty common are things like floors and carpet finishings being included in the property price, or upgrades on kitchen countertops, tiling etc. You can also negotiate on fencing and other things too. If you’re seen as a good buyer you’re in a nice bargaining position.
Can a Mortgage Adviser help me with the negotiations?
A First Time Buyer can find it really helpful to have an adviser on their side. The negotiator is always trying to get the best possible price out of a buyer, while an adviser is in your corner and has lots of experience about other housing developments in the area, what’s normal, what’s valuable and the questions that need to be asked.
Do I have to be a First Time Buyer to get a new build home?
Around 60% of new build buyers are First Time Buyers – but it does depend on the housing development. In a development where the minimum price is £250,000 to £300,000 there won’t be many first timers.
Ultimately the process is no different whether you’re a First Time Buyer or a home mover, it’s more about how experienced you feel in how a house purchase works.
How does Help to Buy work on a new build home?
The main Help to Buy scheme is the government backed Equity Loan, which allows you to use 5% of your own deposit and then borrow another 20% as a loan to use as a deposit.
Shared Ownership is another option, where you can buy a percentage of the property. You might start with a mortgage for 25% of a property,and pay rent on the rest. We then look at ways to increase your ownership over the years to 30%, 40%, 50% and hopefully one day 100%.
These are the main options on a new build property at the moment, with the Equity Loan a little bit more popular.
If I’m not using Help to Buy, what deposit will I need?
We’d always advise 15%, because that’s going to give you the biggest choice of lenders and rates, to get you a competitive deal. Under 15% you will need specialist options – so you might only have the choice of one or two lenders.
I encourage you to save as much as possible on a new property because your deposit affects the interest rate that you get on your mortgage. The more you can put down as cash, the lower your monthly payments will be.
Are mortgage rates the same on new builds and second hand homes?
The rates are similar. New build rates are slightly different from standard residential rates, they are a more specialist kind of rate. Some lenders provide rates for both, which means that the mortgage product is the same across either kind of property.
Do I have to use the developer’s solicitors?
The developer can recommend a solicitor, but you don’t have to use them. Generally they will want to make it easy for you to buy the home, so the solicitor they recommend can be a good choice. It does help to have a solicitor that has lots of experience with new builds, Shared Ownership if that’s relevant, Section 106s and other new build specialisms.
I’ve personally worked with a solicitor that I know is very good when it comes to Shared Ownership and other new build issues and many clients have been happy to use them.
How long does it take to buy a new build home? What are the timescales?
This will vary a lot depending on the stage of the build. In general, if the house is ready when you start the purchase it’s about six to eight weeks until the mortgage completes and you get the keys.
Usually after six weeks you would be in a position to exchange, and then pick up the keys a couple of weeks later. But there are things we can do to really speed that up in special circumstances. Never be afraid to ask for help, we can often find a way forward.
How can a Mortgage Broker help with buying a new build home?
The biggest benefit we can offer you is clarity – we’re here to make sure that you fully understand each step of the journey, to answer your questions and find you the most appropriate mortgage deal.
We often act as the go-between and speak to a developer to confirm your situation, that you’re ready to buy and help iron out any issues. Having a broker on your side helps put you in the best possible position to get the home you want.