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What is a new build mortgage?
New build mortgages could help you buy a recently built or extensively renovated property with a low deposit.
Mortgages for new builds typically cover homes that have been constructed or extensively renovated within the last two years. Each lender will have different rules and criteria though. So, it’s useful to read the small print of any mortgage for a new build property first.
At NatWest, properties may count as new builds if they’ve been constructed, first occupied in their current state, or significantly modernised, refurbished or altered in the past two years.
This guide will help you understand the benefits, requirements, and process of securing a new build mortgage.
What is loan-to-value (LTV)?
LTV compares your mortgage borrowing to the value of the property. It’s generally shown as a percentage.
The LTV helps you understand how much of a deposit you may need towards the purchase of your new home.
As an example, let’s take new build mortgages with a 90% LTV. This means the mortgage would cover 90% of the property’s value. So, you’d need to find a 10% deposit to secure this mortgage on the new build property.
Remember, a larger deposit will mean a lower LTV – and a smaller percentage to borrow. This could lead to lower monthly repayments.
Lower deposits
You might be able to pay a smaller 10% deposit for a new build house, or 15% for a new build flat, when you apply for a NatWest mortgage. This could significantly reduce the amount you need to save in advance.
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No chain to consider
You could be the first person to live in the new build property. If that’s the case, you may not need to worry about a chain when moving home.
A chain is where you need to wait on the sellers of your new home finding somewhere new to buy, while your buyers may be waiting to sell their home too. This can be complex, stressful and could take some time to complete.
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Warranties for peace of mind
Your new build property is likely to come with a 10 year warranty from the National House Building Council (NHBC).
The warranty scheme covers many new properties and it could ease your worries if something goes wrong with your new build home.
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Considerations with a new build mortgage
Mortgage offer periods
New home mortgage offers might only be valid for six months . If your new build is yet to be completed and hits construction delays, you may have to start your mortgage application over.
With NatWest, you may be able to request a mortgage offer extension of three months if you find yourself in this situation.
Builder incentives
You may be offered an incentive to purchase a new build from a particular developer. They might pay towards your legal fees or stamp duty, for example. Remember that lenders could factor in these incentives when reviewing your application for a new home mortgage.
With NatWest, we'll accept builder financial incentives that are up to 15% of the property's purchase price. However, if the incentives exceed 5% of the purchase price, they'll be deducted from the price. Lending will then be based on the reduced price or the property valuation, whichever is lower.
Who is a new build mortgage suitable for?
Mortgages for new builds may be suitable at different stages of the property journey:
Off-plan property buyers
Buying ‘off-plan’ simply means the property isn’t yet to be fully built yet. You base your purchase decision on floor plans and technical drawings, rather than viewing an existing property.
As it could take some time to build the property, you may wish to wait before you apply for your mortgage. But you should get an Agreement in Principle before committing to purchase the property. When your developer nears completion, it may be a good time to start your mortgage application.
Buyers of recently finished homes
Not all new builds are off-plan or fresh from the construction line. For mortgage purposes, if it's less than two years old then it will still be classed as a new build property even if someone else has lived there first.
Renovated property buyers
Homes that have been significantly altered, revamped or modernised could also fall under the new build definition. An example of this could be a new barn conversion. If this is the case, it may be worth talking to lenders about your eligibility for a new build mortgage.
Is a new build mortgage right for me?
A mortgage for a new build could be the right fit if you’re looking to buy a house or flat that’s been finished – or extensively refurbished – in the past couple of years.
You should also check:
- you can meet any deposit requirements
- you’ll stay within the borrowing limits set by the lender
- you’re comfortable with new build mortgage interest rates
- if a new build warranty is included with the property.
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Am I eligible for a new build mortgage?
To apply for a new build mortgage with NatWest, you’ll generally need:
- to be aged 18 or over
- to repay in full by age 75
- proof of ID, such as a passport or driver’s licence
- Proof of self employed income or earnings from employment.
Once you have submitted your application, we will confirm what information is required to progress your application.
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How to apply for a new build mortgage
Step 1: See what you could borrow
- Get an estimate of how much you could borrow, tailored to you, in under 10 minutes.
- Your credit score won’t be affected.
Step 2: Ready to apply?
- Apply online for a new home mortgage or get in touch.
- Easily save your progress and pick things up later.