How to Navigate Mortgage Offers for New Properties?

Steps to Secure the Right Type of Mortgage for New Properties

It can seem difficult to navigate mortgage offers for new homes in the UK, but breaking it down into smaller, more manageable steps will help you get the best deal. Here is a guide to assist you in effectively managing the process:

1. Understand Your Financial Situation

Based on your salary or that of your family, ascertain your financial status and determine what you can afford. Generally, lenders evaluate the borrower’s income ability to make repayments, expenditures, and other credit-related factors.

• Check your credit score: In order to get the best mortgage, it is important to have a high credit score, thus try to raise it before applying.
• Calculate deposit: Lenders usually require newly built homes to have 10-15% of the value of the home.
• Assess affordability: You must think about how much money you can afford to spend monthly.

2. Explore Mortgage Types for New Properties

Some of the mortgage providers have special plans for new builds as such houses present certain characteristics and risks. Common mortgage types include:

• Fixed-rate mortgages: In this mortgage, the interest is fixed, with the same rate being agreed to for a given number of years such as two, five, or ten years.
• Variable-rate mortgages: Interest varies with the lender’s standard variable rate (SVR) or track and reflect rate.
• Help to Buy Equity Loan (England and Wales): The government allows first-time buyers of newly built properties to receive up to 20% (or 40% for properties in Greater London) in the form of lending. This scheme is being phased out, so check its availability.

3. Check Incentives and Schemes for New-Builds

Developers and the government often provide incentives for buyers of new-build properties:

• Developer incentives: Common developer incentives include free furniture, pay stamp duty and cashback offers.
• Shared Ownership: Acquire a fraction (25-75%) of real estate and lease the rest from housing.
• First Homes Scheme: This scheme offers new properties with a discounted price between 30-50 per cent to first-time homeowners usually from the local market.

4. Compare Mortgage Offers

To find the best offer, use brokers or comparison tools. Important elements to compare are:

• Interest rates: Compare interest rates of common mortgage plans such as variable vs fixed.
• LTV (loan-to-value) ratio: The LTV rises with decreasing deposit size, potentially resulting in higher interest rates.
• Costs: Examine the value, early payback, and cost arrangement.

5. ObtainMortgage Agreement in Principle (AIP)

AIP stands for Agreement in Principle which means the lender is willing and able to provide you with a certain amount based on data provided at the beginning. AIP helps you when it comes to bargaining the purchase price on a property and also only searches for properties you can afford.

6. Apply for the Full Mortgage Offer

After your offer on a new home is accepted, apply for a mortgage. Important actions consist of:

• Property valuation: The lender will arrange for a property valuation.
• Legal verifications: The documentation, including contracts and searches, is handled by conveyancing solicitors.
• Validity of a mortgage offer: Verify the expiration date because new-build mortgage offers often have a six-month validity period, which may require an extension.

7. Finalize the Purchase

After the mortgage is approved and contracts are exchanged:

• Arrange insurance: All customers who seek credit facilities normally ask for building insurance before processing any mortgage.
• Complete on the property: On the completion day, the lender pays the owed amount and the property becomes yours.