Newbuy Mortgages

Our mortgage comparison tools have searched the whole market to find and quickly display all the lenders currently participating in the governments Newbuy mortgage scheme. Here you’ll find details of the mortgage products on offer and have the opportunity to compare then with similar products from lenders across the UK.

What are Newbuy mortgages and who can get them?

Newbuy Mortgages

With the economic climate continuing to make it extremely tough to make that first step onto the housing ladder, and also making it equally tough to climb up the ladder to allow you to buy a home that is suitable for the size of your family, the government introduced the NewBuy scheme in order to give people a helping hand by making it easier to buy a newly built home.

So what is the Newbuy scheme?

The NewBuy mortgage scheme was introduced in March 2012 and so is now well-established as one of the possible mechanisms you can use either to get onto the housing ladder, or to buy a larger house as your family grows. The underpinning premise of the scheme is that the government, along with housing developers, are underwriting mortgages so that there are a number of lenders who are then able to provide mortgages to buyers who have as little as a 5% deposit.

There are additional supporting mechanisms that allow lenders to reduce their risk in lending to people with such a small deposit. Should the borrow default on their payments then the housing developers guarantee to pay the mortgage lender 3.5% of the purchase price, and the government will pay 5.5% of the purchase price. This reduction in risk has then made it acceptable to lenders to become involved in this scheme.

Who can use the Newbuy scheme?

The scheme is open to anyone, but it is a particularly effective route for people who are stuck in rental accommodation because they can’t afford to save a large deposit, but who are also in a position to be able to comfortably afford the mortgage repayments on the property that they wish to buy. It is also an effective way for people who need to move to a larger property who have some equity in their current property, but that isn’t enough to provide them with a suitable deposit on a larger property for a standard mortgage.

There are some limitations on using the NewBuy scheme so it is not something that can be used for any house-buying situation. The main stipulation of a NewBuy mortgage is that you have to use the residence as your main property, so it is not something that you would be able to use if you are looking for a buy to let property. There is also a cap on the property value this scheme can be used on of £500,000

Are there any other restrictions?

Newbuy mortgage scheme

As long as the property value is less than £500,000 you will need to have at least 5% of the value of the property as your deposit. This will provide you with your price limit of the new property that you go on to buy. In addition to this you will also need a good credit rating, just as with any other mortgage application.

When you buy a property through the NewBuy scheme you will also find that each housing developer will work with a specific mortgage provider so you will not be able to shop around for your mortgage as you would with a standard mortgage application. Therefore, before you commit to buying through the NewBuy scheme, make sure you look carefully at the interest rates and the repayment amounts, especially if there is any initial discounted rate as this will mean that there will be a sudden increase in your mortgage payments in the future. You also need to be aware that once you have taken out the mortgage that you will be treated just the same as any other mortgage borrower and that there is no additional protection should you start to have trouble making repayments. Also note that if the property is repossessed and property prices have gone down, you will still be responsible for ensuring that the entire mortgage is repaid and so will be expected to make up any difference between the sale price of the property and the mortgage amount.

Get some advice

Even if you are pretty sure you know what you are doing it is always worth getting some independent financial advice in order to make sure that you are aware of all of the current mortgage processes and requirements. This is particularly important as there are additional questions you will have to answer as part of the mortgage application process that the lender uses to lower their risk by ensuring you are fully aware not only of initial payments, but also of potential future payments.

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