New build mortgages

What is a new build property?

Different lenders have slightly different definitions of ‘new build’ for mortgage purposes, but generally speaking a property will count as a new build if it meets one of the following criteria:

• Is newly built and has never been bought or lived in by anyone else

• Has been converted or substantially refurbished (specifically for the purpose of sale) within a certain timeframe (usually the last two years)

• Is not fully built yet, but can be bought 'off plan'

Recent house price statistics found that new builds cost £311,319, on average.

How is getting a mortgage for a new build different?

While the application itself is similar to any other mortgage, getting a mortgage for a new build is different in a few ways:

• Stricter criteria. Some lenders have stricter criteria when it comes to new build properties as there’s a risk that the property's value could fall in the first few years when it stops being brand new. 

• Larger deposit required. There are typically stricter loan-to-value (LTV) limits on new build properties, which is the maximum percentage of the sale price that lenders are willing to lend. With new build properties, some lenders may require you to put down a larger deposit (this can be around 15% or more, though there are some home ownership schemes available to help those with a smaller deposit).

• Trickier timelines. If buying off plan, you might experience delays in construction, which can cause complications if your mortgage offer expires.

How long does it take to get a mortgage for a new build?

Getting a mortgage for a new build home, especially one that hasn't been fully built yet, requires careful timing due to mortgage offer validity periods, typically around six months. If the construction extends beyond this, your offer could expire. You'll then have to request an extension or even reapply for the mortgage, which can cause issues if your financial circumstances have changed since you originally applied.

It can be useful to consult a mortgage broker like our partner, Mojo Mortgages. They have strong knowledge of lender criteria and can help to identify which mortgage provider may be the best fit for you and your circumstances.

Support for first-time buyers getting a new build home mortgage

There are a number of government home ownership schemes that can be helpful to both first-time buyers and certain other applicants.

First Homes scheme

If you're a first-time buyer, you may be able to get a discount of between 30%-50% on the price of certain new build homes in England. The First Homes scheme is intended to help first time buyers on a lower income to get a foot on the property ladder. 

To be eligible for the First Homes scheme, you must be:

• 18 years old or over

• A first-time buyer (if you're buying with someone else, you must all be first-time buyers)

• Able to get mortgage for at least half the price of the home

• Able to prove you have a household income of no more than £80,000 (£90,000 in London)

The local council may also insist that users of the scheme are:

• Key workers (or essential workers)

• Those with local connections to the area through residency or work

• Individuals with lower incomes

Members of the armed forces and their families may be excempt from local criteria.

The properties in the scheme have been built specifically for this purpose and with the intention that they will remain as affordable housing. Should you choose to sell, you'll need to sell your property on to someone who is also eligible for the First Homes scheme. This means you must give your buyer the same percentage discount you received, based on your property's market value at the time of sale.

Shared ownership scheme

There are a number of new-build housing developers that offer shared ownership purchase through a housing association. Shared ownership allows you to buy a percentage of the property and rent the remaining share from the housing association, who own the rest of your home.  

With many shared ownership properties, you have the opportunity to gradually increase your ownership over time, so that you can eventually own it outright. 

Deposit Unlock scheme

The Deposit Unlock scheme is the first non-government home ownership scheme that is widely available in the UK and was developed by the Home Builders Federation to help people buy a new build home with a deposit of just 5%.

Where to buy a new build home

Most property search engines have a new build home filter, but many developers also have their new build homes listed separately, including information on whether or not they are eligible to be bought through a government financing scheme like the first home scheme.