New Build Mortgages

What schemes are available on new build properties?

Shared Ownership is always big in this space. Developers usually offer a certain amount of affordable homes within a project. With shared ownership you buy a percentage of the property and pay rent on the remainder.

I’m a huge fan of shared ownership schemes because it lets you buy a bigger house on day one, and do something called staircasing over the years. As your income and equity increases, you could buy more chunks of the property. Ultimately, you could buy the property outright rather than have to move – and we all know the cost of stamp duty. It’s a brilliant scheme for anyone that can’t quite get what they want on a regular purchase.

Something we do a lot of is Joint Borrower Sole Proprietor which, in simple terms, is a guarantor mortgage. If you want to buy a property but can’t quite get there, a broker might ask you if a family member or good friend might be willing to help you boost your borrowing capacity to buy the property you want. That’s not specific to new build, but it’s something we could do.

With Deposit Unlock, lenders are quite happy to go to 95% of the property value. And there is also the First Home scheme, where you get really healthy discounts off property. These things do change in time, of course. For example, Help to Buy has finished everywhere except in Wales.

But there have always been and will always be schemes – and these always come to brokers first. We’re one of the few brokers in the country on the Own New panel. Not every broker in the UK has access to these products, where you could get interest rates of as low as 1.99%. When the base rate is at 5.25%, that’s extraordinarily cheap [podcast recorded in June 2024]. To qualify for this, you would need a 40% deposit, the APR is 5.4% and not everyone will be eligible.

So it’s always best to come through a broker – we could expand on these schemes and different opportunities. We lay out different options for you. Some you’ll be aware of, some you won’t. But by the end, you’ll be very well informed and ultimately you could make the right decision for you.

Can I get a mortgage on a new build with bad credit?

Yes, you absolutely could. Over the last 18 months, the mortgage market has been challenged in terms of how lenders present their products due to Covid etc. But, since the beginning of 2024 there’s been immeasurable improvement for complex cases – things that might sit outside of the normal appetite for a high street bank.

We’ve seen lenders regain confidence, and they will now talk to clients who may have had some historic challenges with their credit. It could be as simple as one late payment, or something more complex than that – like a debt management plan or a historic bankruptcy.

The great news is that lenders are now offering this alongside the schemes we mentioned. Some ‘adverse’ lenders for credit challenges are supporting these schemes as well. That’s really encouraging.

If you have historic credit challenges, having a conversation really early is key. We do sometimes talk to customers who’ve perhaps buried their head in the sand a little bit, because they have a negative idea as to what’s possible – but I would encourage you to have a chat. You might be pleasantly surprised.

Just have a look at your credit report. Download it from one of the main credit reference agencies. Most of them will let you set up an account easily, and have that in front of you when you talk to your mortgage broker. There are options out there and they seem to be growing every week.

Timing is important. If you have missed payments or small defaults within the last two years, that could be tricky. That’s when we need the specialist players – but it’s still possible. If you’ve had any blips more than two years ago, typically most high street banks would take that on.

If it’s a bit bigger, like a CCJ, or the debt is in excess of £500, again those secondary lenders step in – and their pricing isn’t that far off. Remember that your credit file is like your driving licence, where six years down the track those ‘points’ disappear.

So get your credit file – or, at Heron we could actually do that for you. We’ll just lay out the options, and I predict you’ll get a more positive outcome than you thought.

How do I remortgage my new build property?

The process is always the same whether it’s a new build or not. Timing is important. When you come to refinance, it’s always best to pick up the phone about six months out from when the mortgage product expires. A mortgage offer is only valid for six months, so we can’t pick it up prior to that.

Where you might need to be careful is where, for example, you buy a new-build flat with a small deposit, on a two-year fixed product. Perhaps there’s not been a lot of growth in the property value, in which case we might be a little bit more cautious or have slightly fewer options.

As we’re talking today, house prices are starting to creep back up again, but they do go up and down in time. You might have bought at the top of the market, then house prices dropped and you need to refinance.

It’s not a problem, because your existing bank will always offer you a ‘product transfer’. Even if your mortgage is 100% of the property value, or more, your existing lender has a duty of care to look after you. You’re never left high and dry on the caveat you have made all your payments on time with the lender.

Those occurrences are rare – for the last 100 years house prices have moved above inflation. So as long as you hold on to a property for five years or more, those issues tend to wash out. If you put down a healthy deposit at the outset, there is literally no difference. We’ll just pick up and run with it.

As a client of ours, we have an automated process that reminds you when you need to have those conversations. You’ll have something in your inbox suggesting it’s time to have a conversation. We do encourage you to do that as early as possible, and we always consider your current lender’s offering as part of our recommendation.

What are the pros and cons of new build properties and mortgages?

We are heading into a future where the energy efficiency of your home is going to be significantly important. With a new build, you’re basically future proofing yourself. It’s all going to be about energy efficiency.

The major house builders are now being held to incredibly high standards, irrespective of who’s in government. They are pushed to improve the energy efficiency of the properties they build – because it’s the right thing to do for the planet, but also because it saves us all money.

So you’ll have a property that’s cheaper to run, and that’s brand new, even the appliances. Who doesn’t want to have something that’s brand new? You’ve also got those schemes that might allow you to do something that you perhaps couldn’t without buying a new build. There’s lots of good stuff to get excited about.

Just be mindful of those higher Loan to Value ratios, and if you are buying an apartment you might find certain lenders don’t offer you as many mortgage products. But beyond that, it’s hard to find a downside.

How can a mortgage broker help with getting a new build mortgage?

The main thing is around advice on how to structure the loan. As well as the mortgage products, there are options around the incentives a builder might offer – it might be cash back, which you could put into the Own New product to get a cheaper interest rate.

That’s why brokers are well placed to look at this – we’ve got our finger on the pulse. We get access to things that banks and other brokers don’t.

Aside from that, you can trust us to manage everything. A broker works for you, not the lender, so we’ll always do what’s in your best interests. That will include how to structure the incentive, the lender we go to and what product we take. We look at what you want to do first, then we go to market and find the right outcome. We’re not trying to shoehorn you into solutions – it’s quite the opposite.

We also have a national footprint in the home builders we work with. That knowledge is really important and powerful for you as a client. We may be able to share some wisdom on what’s going on in a certain area. We have knowledge of lots of different schemes and beyond the mortgage conversation, we want to educate you as a prospective buyer around the property itself too.

We’re very passionate about new builds and the future of the property market in this country, and we have a really broad exposure to what’s going on, so pick our brains on that. Mortgages are just one part of it – let’s talk about the house!

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.