New Build Home Mortgages

A new build mortgage is a residential mortgage on a newly built or converted home sold for the first time, assessed like any mortgage but subject to lender rules on new build loan-to-values, incentives, warranties and how long the offer lasts.

Some lenders lend up to 95% on new build houses, so a 5% deposit can be enough, while new build flats are often capped at lower loan-to-values, needing a larger deposit. Lender policies vary.

Lenders restrict new build flats because of concentration risk in large blocks, the new-build premium and resale values. Many cap the loan-to-value lower than for new build houses or resale flats.

England’s Help to Buy equity loan scheme closed to new applications on 31 October 2022. Schemes elsewhere in the UK differ. Current routes for new build buyers include standard 95% mortgages, shared ownership, discounted section 106 homes and developer or industry schemes where available.

First-time buyers can get new build mortgages, often with 5% deposits on houses, and may use shared ownership or discounted section 106 homes. First-time buyer Stamp Duty Land Tax (SDLT) relief applies as for other homes.

Lenders require developer incentives to be disclosed and cap them as a percentage of the price; incentives above the cap are deducted from the price the lender lends against, which can increase the deposit you need.

The Disclosure of Incentives Form is a UK Finance standard form completed by the developer, setting out the price and every incentive offered, so the lender and valuer can assess the true price of the new home.

Cashback, paid legal fees, Stamp Duty contributions, furniture packs and similar offers all count as incentives and must be disclosed. Lenders treat them as reducing the effective price. Undisclosed incentives can lead to a withdrawn offer.

Part exchange, where the developer buys your existing home, is disclosed to the lender, and any amount above your home's market value may be treated as an incentive affecting the price lent against.

New homes often include a premium over comparable resales, and valuers base their figure on comparable sales rather than the developer's price list, so valuations can come in below the price.

Lenders usually require a recognised ten-year new home warranty. Some accept a professional consultant’s certificate, which offers different protection and is not a substitute accepted by every lender. The conveyancer checks the warranty cover note before completion.

The New Homes Quality Code sets standards for registered developers' sales, build quality and after-sales service, with complaints handled by the New Homes Ombudsman Service where developers are registered. Buyers should check whether their developer is registered.

A snagging survey identifies defects before or soon after completion so the developer can fix them under its obligations. It is separate from the mortgage valuation, which does not inspect for defects.

Mortgage offers usually last around six months, and some lenders offer longer or extensions. If the build runs late, an offer can expire before completion, so lender choice matters for off-plan purchases.

If an offer expires before completion, the lender may extend it, sometimes with fresh checks, or a new application may be needed. After exchange you are bound to complete, so expiry is planned for early.

You can buy off-plan with a mortgage, exchanging before the home is finished, but completion may be many months away. Choosing a lender with a long offer validity, or planning to reapply, avoids gaps.

Developers usually set a deadline to exchange after reservation, often around 28 days, which requires a mortgage offer quickly. Having a decision in principle before reserving helps meet it. Missing it can mean losing the reservation.

Once the home is finished, the developer serves notice to complete, typically giving about ten working days. Your mortgage offer and funds must be ready to complete within that period.

Stamp Duty Land Tax (SDLT) applies to new builds on the same bands as other homes, including first-time buyer relief, and is charged on the price paid. Developer contributions to Stamp Duty are incentives that must be disclosed.

Buy to let mortgages are available on new builds, with some lenders restricting new build flats or capping loan-to-value. Rent is assessed on achievable market rent for the new home.