- Buyers of new builds may find it harder than expected to find mortgage
- Will Robertson, 20, snapped up £380k flat with 1.52% two-year fix
- We go through the eight steps which could help you secure mortgage
Show homes around the country are being spruced up this month in preparation for the spring rush from potential buyers.
But while increasing numbers of new-build houses and flats are nearing completion, potential buyers may find it harder than expected to find a mortgage.
Experts say individual lenders take widely different approaches to brand new properties – with some refusing applications for homes that others are happy to accept.
‘No two lenders’ policies or deals are ever alike, and when it comes to newly built homes, buyers may need help finding the most suitable offer,’ says David Hollingworth, of national broker London & Country Mortgages in Bath. Here are eight areas buyers of new-builds should consider.
First-timer: Will Robertson bought a new flat in Cambridge
1. If you are hoping to use the Government’s Help to Buy initiative you cannot choose from the entire mortgage market.
Big lenders such as Barclays, Halifax and Santander offer low deposit mortgages on new homes through the scheme – but other major lenders avoid it.
Ask your developer for a Help to Buy mortgage broker who can assist in finding a lender.
2. Some lenders want a bigger deposit if you are buying a new rather than an existing home. That is because they feel new home buyers often pay premium prices – and just like a new car, a new home can devalue the moment you buy it.
You generally need a bigger deposit for new flats than houses. NatWest wants at least a 25 per cent deposit for most flats and 20 per cent for houses.
‘I DON’T HAVE TO WORRY ABOUT MAINTENANCE’
A newly built flat was the clear choice for Will Robertson.
The 20-year-old recruitment consultant says: ‘I wanted something modern that did not need any modifications or maintenance.’
After looking at homes both old and new, he picked a two-bedroom flat on Crest Nicholson’s Halo development near his office in Cambridge.
He says: ‘I like the high-spec design, the finish and the light.’
Prices on the site start at £380,000 for one-bedroom flats and the developer has a range of incentives including up to £1,000 for legal and survey fees and £1,500 for moving costs.
Late last year, with help from his parents in funding a deposit, Will secured a two-year fixed rate mortgage set at just 1.52 per cent from Santander.
Today new-build buyers with 10 per cent deposits can get two-year fixed rate loans from Santander at 1.84 per cent while those with a 40 per cent deposit can get 1.59 per cent.
Other lenders to look at are First Direct, HSBC, Leeds and Yorkshire building societies.
HSBC wants up to a 15 per cent deposit for new flats and houses; Clydesdale requires 20 per cent for flats but just 10 per cent for houses.
3. If the builders are still on site some lenders will give you longer than others to collect the keys. Most mortgage offers are valid for six months.
But others give slightly longer ‘completion deadline’ for homes still under construction. Halifax currently offers some products for newbuild homes with completion deadlines at the end of September.
4. Builders often offer incentives such as cashback to help boost buyers’ deposits and persuade them to sign up.
However, many lenders will deduct the incentive amount from the property value before offering a mortgage, so don’t assume it will boost your deposit.
Without cashback a 90 per cent mortgage on a £100,000 home gets you a mortgage of £90,000.
If you get a £5,000 builder incentive you may only get 90 per cent of £95,000 – forcing you to find more from other sources to complete the purchase.
5. Lenders also vary on the definition of a newly built home. Some see them as properties that have yet to be occupied.
Others impose newbuild rules on anything built in the past two or three years, even if it has had a previous owner.
Older buildings that have just been converted into flats or houses can also be treated as new-builds by many lenders and as such will be subject to their newbuild deposit and other lending criteria.
6. Check there are no restrictions on the new home.
Some are reserved for local residents or ‘affordable housing’ buyers – restrictions often called s106 deals.
A study by London & Country shows Barclays, Halifax and Leeds Building Society consider homes in these categories while Santander may be less flexible.
The Post Office will not lend on flats converted from offices, industrial sites or local authority blocks, while Santander will not lend on units that are a mix of workplace and homes.
7. A decade ago lots of lenders used to refuse applications from flat-buyers in high rise blocks.
Now many ask a valuer about resale values and lend if the report is positive.
Big names – such as Halifax, Santander, HSBC and Barclays – have done away with limits on building height.
Some small lenders, such as West Bromwich Building Society, retain a maximum limit of five storeys.
8. If you are one of the last to buy in a development, your mortgage chances can be hit. Few lenders offer loans on more than a quarter of plots on any one site.
So if show home staff tell you most buyers went to one or two lenders, these may be the ones to avoid when securing a loan.
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