Recent mortgage Q&A
What mortgages are available if i want to buy a new build property?
There are many reasons why you might be considering buying a newly built home. No-one else will have lived there, the home will be brand new and you can put your stamp on it and in some cases you will be able to specify the fixtures and fittings as the house is built. However, as with anything there are always two sides to consider when looking for a suitable mortgage.
How do lenders feel about lending on newly built properties?
You are likely to find that most mortgage lenders will allow you to take out a mortgage on a new house, but you are also likely to find that many lenders will not provide you with a mortgage to buy a newly built flat. Lenders will also generally require a larger deposit on newly built homes than for second hand properties.
Most people buy a newly built home using a standard mortgage, but there is now also the NewBuy mortgage scheme that can assist you in buying a newly built property if you have a 5% deposit. The lenders that are taking part in this scheme are limited and each housing developer often has a link with a specific lender and thus will give you no choice about the mortgage you take out. The NewBuy scheme is open to anyone and works on the basis of providing you with an equity loan in order to boost your deposit to 25% of the property value to reduce the amount of risk the lender takes on providing you the mortgage. However you do need to be aware that although the equity loan is interest free for the first 5 years, it then starts attracting interest, starting at 1.75% in the first year, and then increasing every year after that, so it is best to have a plan to repay at least part of it after 5 years or you could end up with a very large loan debt when it comes to repaying it at the end of your mortgage term.
Things to be aware of
If your home is not yet built then you may find it difficult to apply for a mortgage using just the plans. You will also find that most mortgage lenders will not actually release any money for the purchase until the new property is complete. It is not just the property itself that can affect a mortgage, the state of the roads around the new estate can also cause problems if they are unfinished as this can cause problems in getting your mortgage finalised. You also need to be aware that some new builds require you to pay for it in stages, so as a stage is completed you will then have to make a payment. This can be difficult if you have an existing mortgage in place on your current home. You should also be aware that if you have to sell your new home within a couple of years of buying it, here is the chance that you may possibly be unlikely to sell it for as much as you paid.
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