New Build Mortgages
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New Build Mortgages
Is it hard to get a mortgage for a new build?
No – if anything, it’s an easier approval process. A lot of lenders will offer enhanced affordability because new build homes are built to such a high, energy efficient standard.
They recognise that running costs of a new build on an ongoing basis are cheaper than a traditional tenement or other type of property. You may be able to borrow more on a new build mortgage. There isn’t anything that’s a barrier with new build – it’s something we discuss with most clients because it’s readily available.
What is the new build mortgage process?
The new build process is actually slightly easier. It’s a case of reserving the property with the builder, and at that point you know what the purchase price is going to be – that’s locked in.
From there it’s just sourcing the right mortgage product available for your needs. Other things need to be factored into that conversation, regarding any incentives available on the plot, which need to be disclosed to the lender.
Another difference with a new build mortgage is that the lender will want to instruct their own valuation. If you buy a second-hand residential property in Scotland, you will obviously have the home report, whereas on new build the lender wants to control the valuation.
That aside, the rest of the assessment is fairly similar. And in some cases, an energy efficient new build is seen as advantageous and potentially, subject to your profile and your circumstances, you could borrow slightly more on a new build property.
So the process is similar, and relatively straightforward, but there are some slight differences. Speaking to the new build experts here at Envoy we will always help you on the journey.
How long does the new build application process take?
As Ross mentioned, a valuation has to happen, but that process is really streamlined between the lender and the builders. It’s typically booked in within a few days of the application.
Mortgage offers then come out pretty quickly for a new build. The only slight difference is you’ve got a build date to work towards, and there’s a completion timescale in place. But in terms of the actual application, there are no real differences – it’s a really quick process.
What deposit do I need and how much can I borrow?
In recent months there’s been a lot of movement by lenders to decrease the deposit needed for a new build property. You could purchase a new build flat or new build house with a minimum 5% deposit. So there’s no significant difference between buying a new build versus a second-hand residential.
That’s subject to each individual’s circumstances, but generally you could buy with a 5% deposit.
In terms of lending, you could potentially borrow more on a new build. The rationale behind that is that a new build is more energy efficient, and the costs of running that property will be lower than on one that’s maybe 20, 30 or 40 years old.
We would assess your income, outgoings and credit commitments to determine what you could borrow. There’s a perception of stricter lending on new builds to a certain degree, but I wouldn’t say that’s the right terminology. There’s a lot of competition in that marketplace, and lenders view new build as good security – so that’s really positive, actually.
Can you get a 95% mortgage on a new build?
Yes. A lot of builders are doing incentives at the minute, and it’s all down to individual developments and build programmes and what they have available on site.
Builders are doing cashback, covering stamp duty costs or legal fees, and there’s things you could do with part exchange. New build is an extremely attractive space for potential buyers and home movers.
There are also phenomenal schemes available for new builds such as Own New – a new scheme that’s come along within the last few months [podcast recorded in June 2024].
There’s lots of exciting stuff happening in the new build space. So if you’re out looking, have a look at new builds. People often default to the second-hand residential market, but there are some brilliant deals to be had on new build.
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What schemes are available on new build properties?
The Own New scheme is fantastic in terms of utilising a potential deposit contribution to lower people’s monthly payments. It’s very innovative and is proving very popular.
Another thing is, for those considering selling their home and don’t like the thought of going on the market, having viewers through the door and that uncertainty of what you’re going to secure for your property, a lot of builders look at part exchange options.
They take on your existing property, and to maximise the price you get you could look at assisted move options through the builder, as well. There’s lots of options within that space, whether you’re a First Time Buyer or moving home.
The key thing is looking at your circumstances, liaising with the builder and getting a structure and an agreement that everybody’s happy with.
Can I get a mortgage on a new build with bad credit?
Yes. Whether you’re considering a new build or second hand residential, don’t ever let credit be a barrier to the conversation.
Everyone’s circumstances are different and our job as a broker is to find the right lender to help, given your background and credit profile.
A whole host of lenders offer mortgages to people who’ve had bad credit in the past – including quite serious credit issues. Even if you aren’t in the position right now, a chat with a broker could allow you to understand the steps you may need to take to improve that situation.
How do I remortgage my new build property?
It’s very easy, the same as it would be for any remortgage situation.
As your mortgage deals come to an end, we at Envoy contact our clients six months ahead and review the options. Generally, you could stay with the existing lender or move to a different one. There are no differences just because you bought a new build property.
The key thing is understanding what the value of the property is now. We’re closely linked with a lot of independent estate agents so we could help understand the value of that property, whether it’s two years later or five years later.
In terms of the advice and application process, there are no differences at all between a property that was brand new two years ago or a property that’s 40 years old.
What are the pros and cons of new build properties?
There’s enhanced affordability on properties with an EPC rating of A, B and sometimes C. Those are typically only available in new build properties, because a lot of the second-hand residential market won’t meet those standards. So better mortgage products are available.
The Own New scheme helps reduce the cost significantly. That’s another pro. It’s all positive. I can’t think of any negatives on the new build side, versus second-hand residential.
What else do we need to consider when looking at new build properties and mortgages?
The key thing is understanding what you could borrow and how much it’s going to cost. Builders typically want to know that you are in a position to proceed.
So if you’re considering buying a new build, speak to us at Envoy as quickly as possible. We could get you in a position where you’re good to go – you could demonstrate an Agreement in Principle, which builders typically want you to have in place before you could reserve..
In a lot of cases we liaise with builders to give them the reassurance that clients are in the position to proceed. We could also help navigate all the schemes and incentives that are available. It could sometimes be overwhelming, so we help navigate that journey and guide you on what is right for you.
Perhaps you’re a First Time Buyer who wants to utilise an incentive on a deposit, or you’re an experienced next-time mover who wants to benefit from lower monthly payments. It’s not complicated, it’s just important to speak to a new build expert and obviously at Envoy, that’s something we could do.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.