Own New Scheme

What costs do I need to be aware of? Do I still need to pay stamp duty?

Stamp duty is a big one, where applicable. Use an online calculator because the rules do change in time. There’s often an allowance for First Time Buyers, so look that up.

Currently as we stand, if you own another property, there is a stamp duty surcharge. On more expensive homes, if you already own other property in the background stamp duty could be quite chunky, and that’s not likely to change.

Some people misunderstand the rules around the 3% surcharge. It’s not just for investment properties – it applies if you’re named on more than one set of deeds in the UK at the point of completion. People can trip over this inadvertently if they hold onto an existing property, rent it out and move into the new one.

Other costs, there are solicitors costs which vary. For a real ‘sausage factory’ conveyancer it’s a few hundred pounds. A more boutique set up will cost a few thousand. With new build, developers often have preferred partners, which we normally recommend because if they’re familiar with the development, it can make life a lot easier. But you’re free to do whatever you want.

Lenders typically don’t charge survey fees these days, and on a new build you’ve got a lot of guarantees in place. So, while you could get your own survey, you’re fairly well covered.

Lenders’ arrangement fees may or may not be applicable and we’ll break all that down for you. You have the option of either paying a fee or adding onto the loan. It’s a very personal decision but if you do add it to the loan, be aware that you’re paying interest over time.

Are there ways to reduce the monthly mortgage costs?

One of the first questions I ask a client is how much you want to spend each month on the mortgage. Then we reverse engineer that mortgage for you. Do we go for a payment mortgage or interest only? Do we blend the two? There’s a lot we could do around that.

The term also makes a difference. Some banks offer 40 year mortgage terms, although it’s unlikely you’ll end up paying a mortgage for that long. You might find that 10 years down the track, the mortgage is considerably more affordable, so you might pay it off a lot faster.

It could be an interesting exercise with the Own New rate-reducer scheme to look at the monthly mortgage cost versus renting an equivalent property. It’s a real eye-opener. Essentially, the home builder is subsidising your mortgage. The difference between your mortgage versus what you could be paying in rent is pretty stark, especially as rents have rocketed up in recent years. It could be another reason to just get on with buying a home.

How many lenders offer the Own New scheme? Which house builders are taking part?

Rather than listing lenders, as they will change, it’s good to point out that there’s already a really good cross section of options on the scheme.

The two launch partners were Halifax and Virgin. Halifax is the largest mortgage lender in the UK at time of recording, Virgin is potentially going to become part of Nationwide and create the UK’s second largest mortgage lender.

Other lenders joined soon afterwards, and from conversations with those behind the scheme there will be a lot more coming. From inception we’ve had lenders to suit people in many different circumstances. There’s the smaller deposit option, the slightly adverse credit option and the longer term option.

Often with these things it’s quite tentative to begin with. Lenders might keep an eye on how it goes before dipping their toes in. But this one was a big bang, and more are joining as a result.

As of now in June 2024, the market is stabilising and that normally gives lenders more confidence. We’ve also just had a general election, where the lead parties both supporting the mortgage market. That should mean more lenders will join schemes like this one, because the consensus is that the mortgage and housing market is pretty healthy.

But from our perspective as a broker, it doesn’t actually matter who the lender is. Our job is to find you the right outcome. We sit down with you, find you the right scheme and work backwards from there. The most important thing is we tick all the boxes and get you the right result.

Can I apply for the Own New scheme if I have bad credit?

Yes, you could, although because the scheme isn’t currently supported by every lender in the market, there are some limitations. But there are enough lender options to have a conversation.

Bad credit is pretty subjective. We often talk to clients who are really worried about a situation that actually isn’t that bad. So whilst we haven’t got a whole host of complex credit lenders on this scheme yet, there are still lenders that would support certain credit situations.

A conversation with a good, experienced advisor could mean that you could make use of Own New. We’ve already seen customers who had written off their chances of using it, but when we look at the credit report it’s not as bad as they think.

What happens when I come to remortgage on the Own New scheme?

There’s no difference. It’s really straightforward. There are no catches to the mortgage, it’s simply that the incentive is baked in to give you a lower interest rate. However, at this time the discount would end and you would need to pay the full amount going forward.

At the natural refinance point we will sit down and ask about your plans for the future and recommend some options. You could look on our website for more on remortgaging, rather than have us cover it all off here.

What are the pros and cons of the Own New scheme?

The main win of this scheme is a lower interest rate versus what you could get without the scheme. So if your priority is to keep costs down, you should seriously consider this – have a conversation with an advisor who has access to it.

It allows you to make better use of your money each month. Let’s face it, when you move house, it’s pretty expensive. You’ve got lots of other things to deal with, although, if you’re buying a new build your utility bills will hopefully also be cheaper.

This is going to cost you a lot less than a standard mortgage. And with that additional energy efficiency, it’s a win-win.

If there are any disadvantages, one might be the choice of lenders. It may be that for you specifically, the scheme isn’t suitable. I think there’s a lower chance of that, however.

Another factor that stands out is that there may be a step up in costs at the end of the mortgage period. Make sure you understand that this is heavily subsidised in the early years and, depending what’s going on with the market, your mortgage may well go up in the future.

Banks do underwrite at rates well above what you’re paying in a normal market so it should still be affordable. But your lower interest rate is for a limited time only. When it comes to the end of your two or five year deal, the mortgage is more than likely going to increase.

How do I apply for a mortgage through the Own New scheme?

Not all brokers have access to this scheme, and we’re very proud to offer this to our clients. The application process is the same as for any mortgage. We’d sit down and look at your credit file, your affordability and get an Agreement in Principle as usual.

At the outset, there is just a bigger conversation in terms of whether you want the cashback as an incentive or a lower interest rate. A broker is very well placed to do that – we’re not the developer, we’re not a bank, we work for you and we want to get you the right outcome.

Overall, Own New is a really good thing. Whilst it’s not going to solve every challenge for every buyer, it’s another tool. If you could comfortably afford your deposit and other upfront costs for a property purchase, but the monthly payment is delaying your decision, give this a good look. It’s quite unique.

There’s nothing else out there that comes close in bringing those costs down. It might well be that this means you could get that dream home and do something that you didn’t think was possible, or would take you another year or more.

This isn’t just a transaction to us. This is the start of a journey – and we want to get your mortgage paid off. I’ve never met anyone who wants a mortgage. We want to work with you to get debt free as quickly as possible. This is the first step, and we’ll be there for your refinancing and what comes after. We always want money in our client’s pockets, not in the bank’s.

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