If you’re looking at new build homes, you might be wondering whether you need a special mortgage, how much you can borrow and how much deposit you’ll need.
The good news is that new build mortgages work in much the same way as mortgages for other homes. You’ll still need to meet your lender’s criteria, choose a suitable mortgage and have your application approved before you can complete your purchase.
In this guide, we’ll take you through the new build mortgage process, from working out your budget and saving your deposit to receiving your mortgage offer and getting the keys to your new home.
A new build mortgage is simply a mortgage used to buy a newly built home. There isn’t a completely separate type of mortgage for new builds, although some lenders offer products specifically for new build properties. Just like any other mortgage application, your lender will look at things such as your income, outgoings, credit history and deposit when deciding how much they’re willing to lend. What are new build mortgages?
The basics are the same. You borrow money from a lender to buy your home, then repay it over an agreed period, with interest. There can be a few differences when buying a new build, though. Some lenders have specific criteria for newly built homes, while others might offer mortgage products designed for new build properties. There can also be a difference in timing. If your new home is still being built, you might receive your mortgage offer before the property is ready to move into. This makes it important to check how long your offer lasts and what happens if your completion date changes. Are new build mortgages different to other mortgages?
A new build home is a property that has recently been constructed and hasn’t previously been occupied. This includes new build houses and apartments bought directly from a housebuilder.
Different lenders can have different criteria for new build properties, so it’s worth checking the requirements before you apply.
The new build mortgage process is generally straightforward, although timings can vary from one purchase to another.
Here’s a quick breakdown of the key steps in buying a new build.
You’ll usually:
Your new build mortgage deposit will depend on the mortgage product and lender you choose. For example, a 95% loan-to-value (LTV) mortgage could require a 5% deposit, while a 90% LTV mortgage would require 10%. So, if you were buying a £250,000 home with a 5% deposit, you’d put down £12,500 and borrow the remaining £237,500. The minimum deposit available to you will depend on your circumstances, the lender and the property. Saving a larger deposit can also reduce the amount you need to borrow and might give you access to a wider range of mortgage products.How much deposit do I need for a new build mortgage?
There’s no one-size-fits-all answer. Lenders will look at your circumstances before deciding how much they’re prepared to lend.
They might consider your:
A new build mortgage calculator can give you a useful starting point, but it won’t guarantee how much a lender will offer you.
Take a look at our budget and affordability guides for more information.
LTV stands for loan to value. It shows how much you’re borrowing compared with the value of the property.
For example, if you bought a £250,000 home with a £25,000 deposit, you’d borrow £225,000. That’s a 90% LTV mortgage.
Generally, the bigger your deposit, the lower your LTV. This can affect the mortgage products and rates available to you.
Understanding new build mortgage rates can help you get a better idea of what your monthly payments could look like.
Rates vary between lenders and mortgage products and can change over time. The rate you’re offered can depend on factors such as your deposit, LTV, financial circumstances and the wider mortgage market.
New build mortgages aren’t automatically cheaper or more expensive than mortgages for older homes. Some lenders offer products specifically for new builds, while others offer their standard residential mortgages. The rate available to you will depend on the lender, product and your circumstances. When comparing mortgages, remember to look beyond the initial interest rate. Check the overall cost, including any product fees and what rate will apply once an initial fixed or discounted period ends.Are new build mortgages cheaper?
Your deposit isn’t the only cost to budget for. Depending on your mortgage, you might also have a product or arrangement fee, valuation fee or mortgage advisor fee.
You’ll also need to consider other costs of buying a home, such as legal fees, moving costs, insurance and any applicable Stamp Duty.
Stamp Duty Land Tax (SDLT) is separate from your mortgage. Whether you need to pay it depends on factors including the property price, where you’re buying and whether you qualify for first-time buyer relief.
If you do need to pay Stamp Duty, speak to your lender and solicitor about how this fits into your overall budget rather than assuming it can be added to your mortgage.
Our guide to Stamp Duty is a great place to start.
Once your mortgage application has been approved, your lender will issue a mortgage offer confirming the terms of your borrowing.
Mortgage offers have an expiry date, and the length of time they remain valid varies between lenders.
This can be particularly important with a new build because your home might still be under construction when you receive your offer. Your completion date could therefore be some time away.
Before applying, check with your lender or mortgage adviser how long the offer will last and whether they offer extensions for new build properties.
If your mortgage offer expires before your new home is ready, speak to your lender or mortgage adviser as soon as possible.
They may be able to extend the offer, depending on the circumstances. Alternatively, you may need to go through some of the mortgage application process again.
Our handy guide to solicitors, contracts and completions helps explain the process.
A new build mortgage calculator can be a handy first step when planning your budget. You’ll typically enter information such as your income, deposit, property price, mortgage term and an estimated interest rate to get an indication of what your monthly payments could be. Remember that this is only an estimate. Your lender will carry out its own affordability assessment before deciding whether to offer you a mortgage. It’s good to understand how things like your credit score could affect your ability to get a mortgage. It’s also worth budgeting for your other monthly costs, including council tax, energy bills, insurance and household expenses. New build mortgage calculator and planning your budget
There are schemes available that could help eligible buyers with the cost of purchasing a new build. The support available and eligibility criteria can change, so always check the latest information.
Persimmon offers a range of schemes that could help eligible customers with the cost of buying a new home. Depending on the scheme, this could include support with your deposit or mortgage costs.
For example, Mortgage Assist could provide a contribution of up to £20,000 towards mortgage payments on selected plots, subject to availability and eligibility. Other schemes, including Deposit Boost, may also be available on selected homes.
Take a look at our range of schemes that can help first time buyers with deposits and mortgages.
Getting your first mortgage might seem daunting at first, but taking things one step at a time can make the process much easier to understand.
From saving your deposit and working out your budget to finding your new home, our first-time buyer guides are here to help.
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