Buying a new-build home
Learn about the benefits and drawbacks of buying a new-build house or flat, how new-build mortgages work, and whether you’ll pay more for a new property.
What exactly is a new-build property?
A new-build property is one that has never been lived in before.
Homes that are relatively new but have already been owned and lived in by someone else are sometimes referred to as ‘new-build,’ but this guide is about houses and flats that have not yet been bought or lived in by anyone.
There is a lot of emphasis on the importance of building more homes right now in order to address the national housing shortage.
The government has stated that 300,000 homes will be built each year by the mid-2020s, but current figures are far lower: According to Fullfact.org, 184,000 new homes were built in England in 2016/17.
Why should you buy a new home?
One of the primary advantages of purchasing a new-build property is that it is less likely to require the same level of maintenance as an older property, at least initially. Because they are typically better insulated than period homes, your energy bills may be lower as well.
You may be able to choose certain aspects of the design if you buy off-plan (before it’s actually built).
Another advantage, if you require financial assistance, is that the Help to Buy equity loans scheme, in which the government lends you a percentage of the property price, is only available on new-build properties.
What exactly is included in a new-build property?
One of the major benefits of purchasing a brand-new home is that many of the fixtures and fittings that you would otherwise have to pay for are often included in the price.
What exactly is included depends on the developer and what they are offering. You may (but are not always) given washing machines or dishwashers, as well as wooden or carpet flooring.
Developers will frequently try to upsell you on additional items. Be cautious here; the price of these items may be inflated, making it much cheaper for you to source and pay for them yourself.
Today’s building rules and regulations also imply that there are standards that developers must meet in order to make your property as energy efficient as possible, thereby saving you money on utility bills.
This means that energy-efficient features like double- or triple-glazed windows, insulated walls, roofs, and doors, and energy-efficient heating are all standard in new-build properties.
Is it possible to negotiate the price of a new build?
When properties are being built, asking prices are frequently plastered all over the hoardings.
Of course, the developers will tell you that this is the price you must pay – but this is only an asking price, and you should be prepared to negotiate.
The likelihood of success will be determined by a number of factors, including the location of the property, the level of demand, and the stage of development.
If the project is still in its early stages, there may be an opportunity for a deal to be struck because the developer may require funding to continue the project. If, on the other hand, the project is nearing completion and the developer has yet to find a buyer, you may be in a strong position here as well.
The procedure for purchasing a new home
1. Organize your finances.
Seek the advice of a qualified mortgage adviser to determine how much you might be able to borrow. That way, you’ll know exactly what you can afford before you start looking at properties that are out of your price range.
Before you begin house hunting, you should have a mortgage agreement in principle (AIP), especially if you are a first-time buyer.
It’s a document from a mortgage lender confirming that they will, ‘in principle,’ give you a mortgage for a certain amount, which you can use to demonstrate to the developer that you can afford the property.
2. Find a property
The following step is to locate a development that you like the look of. If you want to apply for a Help to Buy equity loan, you must first ensure that the development is part of the scheme.
Make sure you do your homework on the neighbourhood, local amenities, and the developer’s track record for delivering high-quality properties on time.
Once you’ve determined your price range, it’s time to start looking at new-build developments. You’ll either be shown around a show home – which will exactly or closely replicate the property you’re considering buying if it hasn’t yet been built – or a marketing suite if the show home hasn’t yet been built.
3. Make an offer and pay a fee
It’s time to make an offer if you want to buy the house and are confident you can afford the monthly mortgage payments. This does not have to be for the advertised price.
If your proposal is accepted, you will be required to pay a reservation fee. This is usually between £500 and £1,000 and is deducted from the purchase price when you complete.
If you decide to cancel, please keep in mind that this fee is non-refundable.
4. Begin working on the legal and financial issues.
To handle the legal aspects of your purchase, you’ll need to hire a conveyancer or solicitor. It may be beneficial to find one with new-build experience; they will ensure that the developer has received proper planning permission and that the estate has access to all necessary services, such as roads and sewers.
They will also negotiate the date you will receive your keys and manage the funds for the purchase of the property.
At the same time, you’ll begin the mortgage application process and wait for your lender to have the property independently valued.
5. Wait to move in
You’ll exchange contracts on a new-build property months before you move in. This is the time to pay your deposit to your conveyancer.
When planning your move-in date, you’ll come across some jargon.
The first is the ‘short-stop’ date, which is when the developer expects to complete work, and the second is the ‘long-stop’ date, which is when the home must be finished by.
In theory, the ‘long-stop’ date is intended to protect you from losing your mortgage offer, which typically expires after six months (depending on the lender). However, completion dates can and frequently do slip: according to New Homes Review, more than 40% of new-build homes aren’t ready by the original deadline.
This is where having a good conveyancer comes in handy, as they should keep you and your mortgage lender informed throughout the process.
Before you move in, have a snagging survey done so that any problems with the property can be identified and fixed as soon as possible.
New-build mortgages
Obtaining a mortgage for a new-build home can be more difficult than for an older property, as some lenders place stricter limits on the maximum value of a property on which they will lend.
This means you may be limited to borrowing 85% of the value of a new-build house or 75% of the value of a flat, whereas lenders may be willing to lend a higher percentage on an older property.
Timing can also be an issue. Mortgage offers are typically valid for six months, which can be inconvenient if you’re purchasing a home that hasn’t yet been built and the projected completion date is further in the future.
Some lenders will consider extending their offers, but this is frequently conditional on reevaluating your application.
A few lenders make longer-term mortgage offers for new-build homes, but these are far from the norm.
An unbiased mortgage broker should be able to advise you on the best lender and deal for your particular situation.
What schemes can help me buy a new-build?
So far, 211,000 new homes in England have been purchased using the government’s Help to Buy equity loan and London Help to Buy schemes, which are only available for new-build homes.
Equity loans through Help to Buy are also available in Scotland and Wales, but not in Northern Ireland.
If you can’t afford to buy a house outright, you could look into shared ownership, which allows you to buy a portion of a house and pay rent on the rest.
