What are the Benefits to a New Build Mortgage for First-Time Buyers?
With mass property shortages, the UK government has set targets for 300,000 properties to be built every year until around 2025. That means more new build properties, and more government support schemes to help new buyers afford such a home.
New builds are also a great choice if you haven't owned a property before, and aren't familiar with upkeep and maintenance costs.
Energy-efficient new properties are also more cost-effective to heat.
In some cases, developers offer incentives such as cash contributions towards your Stamp Duty costs or allowing you to select finishes and colours.
Support Schemes for First-Time Buyers of New Build Properties
These are some of the most popular schemes to help with the costs of your purchase:
- Help to Buy Equity Loan Scheme
Help to Buy offers an equity loan from the government up to 20% of the property value, or 40% in London. That means you need just a 5% deposit and can take out a government loan for a further 20%, making a total 25% deposit that will help you find an affordable mortgage.
Properties eligible for Help to Buy equity loans must be new builds and must cost less than £600,000.
While this scheme is now closed to new applicants, it's worth mentioning since first-time buyers can still use a Lifetime ISA to save towards buying their first property.
This ISA scheme involved a 25% contribution from the government to top up the value of your savings.
- Help to Buy Shared Ownership Scheme
Shared ownership is becoming more popular, and involves buying a proportion of a property, between 25% and 75%. You then pay rent on the balance of the property you do not own and can buy more of the property later on.
This scheme allows lower-income first-time buyers to purchase a share in a property at an affordable rate, and pay lower rental prices only on the proportion they do not own.
- Social HomeBuy Mortgage Schemes
This scheme enables tenants who are renting from registered scheme participants to buy social housing at a discounted price.
Tenants can purchase the property via shared ownership, as above, or can buy the entire property.
The government runs this scheme for first-time buyers aged from 23 up to 40 and offers a discount up to 20% of the value of a new-build home.
Properties must not be worth above £250,000, or £450,000 in London, and you must remain in residence without selling or letting out the property for at least five years.
There are a few different mortgage products available from banks that have been designed to help first-time buyers get onto the property ladder.
One example is the Family Springboard mortgage from Barclays, which is available for new builds. Your relatives can help raise funds for the deposit, and you'll need at least a 5% deposit with any extra down payments contributed by your family.
- Guarantor New Build Mortgages
Guarantor mortgages are an alternative option and means that a family member provides a guarantee, with their property used as security.
Your guarantor will need to hold enough equity to guarantee your lender will be able to recoup their lending, have a good credit history, and be financially stable enough to afford to cover your mortgage repayments should you fall behind.
What are the Eligibility Factors for a First-Time Buyer New Build Mortgage?
Lenders will run through all the regular checks before offering a new build mortgage. In many cases, the maximum they can lend depends on how they value the property, and whether they have a maximum percentage, they will lend against a new build.
Experienced brokers can find the best deals on the UK market, and negotiate with lenders to find you the most competitive lending terms.
The right lender for you depends on multiple factors, such as:
- What LTV ratio you wish to borrow.
- Your income and affordability assessment.
- Your credit history and rating.
As a whole-of-market broker, mortgage advisors has access to every mortgage product, and every lender on the market, and can recommend the right lenders whose eligibility criteria we know you can meet.
Give us a ring on 0330 304 3040, or contact the team via email at [email protected] for bespoke advice, independent recommendations, and our support at every stage of the application process.
