Applying for a new build mortgage
Taking out a mortgage on a new build property should be very similar to taking out any other mortgage. However, there are some key things to consider when taking out a mortgage on a brand new house, especially if it’s still in the development stages.
Timing is the most likely challenge that you will face when looking to take out a mortgage on a new build. This is because mortgage offers tend to only be valid for up to six months. This can be an issue if the house you want to buy hasn’t been built yet. Some mortgage lenders might consider extending their offer but this is usually subject to reassessing your application.
Buying a house off-plan
Buying houses that have not yet been built (off-plan) is becoming a more popular trend for house buyers. Customers are becoming more used to buying a house from viewing show homes and building plans. In addition to this, government incentive schemes such as Help to Buy has encouraged new property developments. These schemes are encouraging more first-time buyers to purchase new build properties.
Although slightly riskier than purchasing a house that’s already built, it allows you to be the first owner of a brand new property. Buying off-plan also has other benefits, such as adding fixtures and fittings customised to your own personal taste and requirements. New property developments also offer a way for people to purchase houses in sought after locations.
Other new-build mortgage considerations
Another thing to consider is that mortgage lenders are often stricter on the loan-to-values (LTVs) on new-builds. These are typically far lower in comparison to what lenders will typically loan for an older property. In general, most lenders won’t lend above 85% LTV and 75% for a flat.
Why Clever Mortgages?
At Clever Mortgages we can offer you the support and advice required to ensure you get the right mortgage for your first home. We provide access to a comprehensive range of mortgages from across the market. We are also authorised and regulated by the Financial Conduct Authority (FCA) and adhere to the Treating Customers Fairly (TCF) guidelines, so you can be confident that we will treat you with integrity and only recommend products that meet your needs.
A fixed rate mortgage is where your interest rate stays the same for a set time period (usually between 2-10 years). As a result your repayments are exactly the same each month, regardless of what happens to other mortgage rates. These types of mortgages are popular with first time buyers and people looking to budget each month, especially those who have suffered from a poor credit history.
The main downside to a fixed rate mortgage is that if mortgage rates go down you can be paying a higher amount than you would on a variable rate mortgage. However, this can also go in your favour and if interest rates increase you can be paying less than you would on a variable rate.
Every lender will have their own standard variable rate (SVR), which is considered their basic mortgage. This interest rate goes up and down, usually in line with the Bank of England’s interest rates but the lender is free to raise this at any time.
This means that your monthly payments can go up or down depending on what the interest rate is at a given time. Some months you could be paying more whilst other months you could be paying much less.
A discount mortgage is when a reduction is applied to the lenders Standard Variable Rate (SVR) for a certain length of time (typically 2-3 years). Discount mortgages are attractive as they can allow you to pay slightly less than the bank's standard rate. However as the SVR can still fluctuate they are not ideal for people who are looking to stick to a strict long term budget.
A tracker mortgage is basically a type of variable rate mortgage. What makes them different from other variable rate mortgages is that they follow – track – movements of another rate, the most common rate that is tracked is the Bank of England Base Rate.
A capped mortgage is the same as a variable rate mortgage; however the interest rate can never rise above a set “cap”. These mortgages can work well for people who can budget for different mortgage repayments each month but want the reassurance that their payments will never go above a certain amount.
Offset mortgages are linked to a savings account as well as your current account. Your savings will be 'offset' against the value of your mortgage, and you'll only pay interest on your mortgage balance minus your savings balance. These types of mortgages work well for higher earners or people who have a good amount in savings that they want to use towards paying their mortgage.