How to Get a Mortgage for a London New Build: Essential Tips and Steps

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Buying a new build home in London is an exciting milestone, particularly for a first-time buyer or someone upgrading from older properties. However, securing a mortgage for a new build property can involve a few different steps compared to traditional mortgages. Here’s a clear, easy-to-follow guide to help you navigate the process with ease and confidence.

Understanding new build mortgages

Mortgage lenders classify properties as new builds if they’re recently constructed, never occupied, substantially renovated like a barn conversion, or when buying off plan from technical drawings. New build mortgages often have distinct eligibility criteria, interest rates, and requirements.

New Builds vs Older Properties

New build properties offer numerous advantages over older properties, including energy efficiency, lower maintenance costs, and peace of mind through a build warranty provided by bodies such as the National House Building Council (NHBC). However, mortgage lenders sometimes offer lower loan to value (LTV) ratios on new builds, reflecting their cautious approach due to potential market value volatility.

Deposits and costs

Mortgage lenders will typically require a deposit of 10%-20% of the purchase price for a new build home. Schemes such as shared ownership can significantly lower these initial costs, making a new build house more accessible to first-time buyers.

The step-by-step New Build mortgage process

Consult a Mortgage Adviser or Broker: Engaging a mortgage adviser or mortgage broker at the beginning of your buying journey ensures access to diverse mortgage products and competitive mortgage rates. Advisers, like us, can navigate eligibility criteria and match you with the ideal mortgage lender.
Mortgage application: Your mortgage application will require details about your employment, income, credit history, and the specific build property you intend to buy. Ensuring accuracy and completeness will streamline approval.
Securing your mortgage offer: After successful application, your lender will issue a mortgage offer. This details loan amounts, mortgage rates, monthly payments, and the offer’s validity, usually around six months to accommodate the new build’s completion date.
Exchanging contracts and legal completion: Legal fees, searches, and contract reviews by solicitors ensure your property’s legitimacy and compliance. Some developers offer incentives like legal fees paid or contributions towards stamp duty, easing upfront expenses.

Shared Ownership mortgages

Shared ownership mortgages enable you to purchase a portion of a new build property while you pay rent on the remaining share. This scheme greatly benefits first-time buyers struggling with the higher purchase price of London homes. Shared ownership offers the flexibility to gradually increase your share over time.

Buying off plan

Buying a new build flat or home off plan means purchasing based on technical drawings before building work is completed. Although beneficial for securing a good purchase price early, be mindful of potential delays in construction which could impact mortgage offers and completion dates.

Valuation and Market Value considerations

Mortgage lenders base their mortgage offer on an independent valuation, potentially differing from the estate agents’ listed price. Understanding this is crucial to avoid surprises that could affect your financial planning.

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Stamp duty and additional Costs

Remember to factor in additional expenses such as stamp duty, legal fees, and potential costs of moving. Some builder incentives can offset these expenses, but careful budgeting is essential.

Choosing the right mortgage lender

Selecting mortgage lenders experienced in new build mortgages is vital. These lenders understand the specific risks, timelines, and potential delays associated with newly built properties, ensuring your mortgage journey remains smooth.

Expert assistance from The Mortgage and Protection Hub

At The Mortgage and Protection Hub, we specialise in guiding homebuyers through the intricacies of buying a new build property in London. Our team of mortgage brokers and advisers is here to assist you at every stage, from application to completion, ensuring you secure the best new build mortgage for your circumstances.

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With over 100+ five-star reviews, we help first-time buyers in London and Brighton find the right mortgage lender, explore government support, and secure the best mortgage deals available.

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