First Time Buyer New Build Mortgage

What are the requirements for getting a mortgage on a new build as a First Time Buyer?

There are lots of requirements, but the positive here is that there are no major differences between getting a new build mortgage and a mortgage on any other property. The process itself is the same.

One thing with new build is to take a little bit of care around deposit, particularly if you are buying a flat or an apartment. Sometimes you might need a slightly bigger deposit. Beyond that, there aren’t many additional requirements, it’s largely like any other mortgage.

Normally speaking, lenders will offer you an income multiple of around 4.5 times your income. Depending on what you earn, that could go up as far as 5.5 times or more, with some specialist lenders. Again, that would apply to both an existing property and a new build.

Another thing to bear in mind is that there are lots of schemes which are often exclusive to new build. They may give you a few more options than on other property. Schemes include Own New, Shared Ownership, Deposit Unlock, the First Home scheme – and there are others.

We’ve found recently that some lenders will actually go further on a new build purchase than on a regular property. The reason is that new homes are built to a far higher energy efficiency standard, so your energy bills are less. If your energy bills are less, the loan’s more affordable. Two of the three mainstream lenders now will offer you a larger loan on a new build than secondhand. So if you’re going to buy for the first time, there’s some real positives in this area.

How much deposit do I need for a mortgage on a new build property?

The one thing to be mindful of again is that if you are buying a new build flat or apartment, you may potentially need a slightly larger deposit. It could be trickier to get a mortgage on a new build with a 95% loan requirement and you might find the lender needs a bigger deposit than 5%.

The value of the property itself could be a factor. Certainly with higher value purchases in London and the Southeast, the more you go up the value scale, the larger the deposit that’s required.

Most people don’t understand that actually high value property is harder to resell. That’s why banks are a bit cautious, but that’s not specific to new build. It’s the same across the market.

When you get to £1 million plus, there might be slightly different rules – the entry point might be a 15% deposit for most lenders. As ever, you could do a much smaller deposit with the right bank – but we’ll talk about that in more detail once you have a specific property in mind.

Can I use government schemes to get a mortgage on a new build?

Yes, you could use government schemes. We should probably mention the Help to Buy scheme, which historically was very successful. We’re still helping lots of clients use that scheme successfully in Wales, but in the wider UK it doesn’t exist any more.

In its place are lots of other options that all solve slightly different problems. While Help to Buy was managed by Homes England, some of the newer schemes are run at a local authority level, and others are completely private.

While shared ownership is a national scheme, it’s run with local authorities and housing associations governing the qualification rules – which may add a layer of complexity. That generally means that it’s always good to get advice.

Other schemes like Own New or Deposit Unlock are privately arranged schemes and have been created by the market through collaboration between lenders and house builders. Again they are on a national scale.

You’ve then got things like the First Home scheme, which is an evolution of discount market sale, and allows local people in specific areas to benefit from a discount that’s often subsidised by the local authority.

Just bear in mind that these are all very subjective to change. As lenders and builders join the schemes, their criteria might expand or shrink depending on demand. If you’re at that early stage of your buying journey, go and get some advice. It might well be that there’s a scheme that you’d overlooked or didn’t know about, and it might just be the thing that helps you get into that dream home.

Can I get a mortgage for a self-build property as a First Time Buyer?

This isn’t strictly speaking new build. Self-build is quite a different thing, but of course you could get a mortgage on a self-build property.

Self-build could be buying a plot of land and building from the ground up. It might be buying a property, demolishing it, and restarting, or a renovation where you take things down to the brickwork and build back out.

That’s far riskier from a lending perspective, because once you start doing work, the property value could actually go down. All things we’ve mentioned around the schemes and deposits don’t apply in the self-build space. It’s a very different animal.

Most banks want a 25% deposit. It could be that you own the property already, or you own some land. It’s all about the structuring of how you do things. A 25% deposit is obviously quite chunky, but you might work with a lender who covers all of the building work and you don’t need to put any more cash in after that point.

It will be very specific to the scheme and the value. The key things are the acquisition cost and the build cost. You’re going to need a costed schedule of work and most banks will insist on a quantity surveyor overseeing the project. Also, a level of experience is a big factor.

If it’s the first time, you might want to do this in a joint venture with somebody else or get a building contractor in – that ticks the experience box. A lender will pay the funds in perhaps three, four or five stages. That’s going to be relevant to the schedule of works. A broker is absolutely essential – we could help oversee all of this.

Sometimes lenders need a prod to open up the chequebook. I had that on my own renovation project. Not all lenders provide self build mortgages, but if you get it right, you could be in a really good place – you have your own property built to your own requirements. And invariably, the effort warrants the reward. You typically end up with a far greater value property than you would get on the open market.

What types of new build properties can I get a mortgage for?

We’ve touched on the difference between apartments or flats and houses. Both are mortgageable, but there might be an enhanced deposit requirement.

The only other thing to add here is that we are seeing more modern methods of construction. While this is what the planet needs in terms of energy efficiency and sustainability. Lenders have struggled to keep up with that, although recent months have seen a big improvement.

Factories are essentially building pods on the ground and then craning them into place in a tower block, which is really impressive. I’ve been to a couple of these places and it’s amazing what they produce.

I think we will see more buildings heading this way. When you are talking to your advisor about the kind of property that you’re buying, if it’s being built with any modern method of construction, it’s worth flagging it up. Whilst the majority of lenders are now coming on board, we need to make sure that they’re completely aware of what you’re buying and that it has all of the appropriate certificates.