New Build Mortgages

Southampton, Hampshire, National

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage, or any other debt secured on it.

New Build Properties are a fantastic option whether you are a first time buyer, upsizing, downsizing or just looking to live in a modern home benefitting from lower running costs and energy bills. There are many other benefits of purchasing a new build property:

  • The property is a blank canvas so you can put your own stamp on it
  • No chain in the purchasing process
  • Excellent quality build
  • 10 Year Warranty
  • Government schemes making them more affordable

New build process

When purchasing a new build there are just a few extra things to be aware of before you get started.


Preparation

Regardless of the type of property you’re buying, we always advise that you’re as organized and as mortgage ready as possible so you are in the best position to move forward. When it comes to buying new build homes, you need to be even more ahead of the game as when you put down a deposit, you often only have 28 days to exchange contracts.
 


Developer Incentives

Some property developers have been known to offer incentives if you buy their property. These can include: wavering stamp duty, reducing legal fees, for example. Developers tend to do this rather than reduce the price of the property, and these incentives can work well with first time buyers who are looking to cut costs wherever possible. Some lenders have issues with certain incentives and how they are used but with our vast experience within the new build sector we will make sure we proceed with the incentive friendly lenders and position it in a way to make sure you get the best deal possible.
 


Mortgage offers

Any mortgage offer is only valid for six months, so you’ll need to bear this in mind when it comes to applying for your mortgage. If you are buying off plan a lot of the completion dates might be over this period of time, here at Alexander Southwell Mortgage Services Ltd we have a wealth of experience with dealing with future completion dates and we will make sure your mortgage offer is able to extend within the timescales that are required.

Government schemes – Southampton, Hampshire, national

Many government schemes are available for first time buyer & Homemovers, a lot of these are aimed at specific groups of people, like local residents or certain people who earn under a certain wage. With many different schemes and eligibility rules it might be difficult working out whether you would qualify or not. Everybody’s circumstances are different, once we have had an initial chat with you we will be able to inform you which scheme is best suited to you.

The most popular schemes funded by the government are the help to buy equity loan, shared ownership and forces help to buy schemes, please find further information below.

Alternatively these are the other affordable home schemes that will help you get on the property ladder or upsize and move to a larger home.

  • Right to buy
  • Help to Buy ISA
  • Discounted House sales
  • OPSO – Older peoples shared ownership scheme
  • HOLD – Home Ownership for people with Long-Term Disabilities

Help to buy Equity Loan & Help to buy London

This help to buy scheme offers an equity loan where the government either lends up to 20% or 40% (For help to buy London) of the property to first time buyers or homeowners to purchase a newly built home.

How they work. . . . . .

  • You need at least 5% of the sale price of your new build property for the deposit. You can input a larger amount if you would like to.
  • The government lends you up 20% of the sale price
  • You borrow the rest from the mortgage lender for the remaining 75%
  • The loan will run for a maximum of 25 years
  • You don’t pay any interest or fees on the government equity loan for the first five years, in the sixth year you will be charged 1.75%

Please Note: For Help to Buy London these figures would be based on 5% deposit, up to 40% equity loan & 55% mortgage. Help to buy covers 32 London Boroughs & city of London.

Cost breakdown and paying the loan back. . . . .

  • Years 1-5: No Fees
  • Year 6: 1.75% of the loan
  • Year 7 onwards: 1.75% + RPI + 1% (These fees are only interest and does not go towards paying back the equity loan)
  • You can only repay back 10% or the full 20% of the market value of your home, you cannot make small monthly payments.
  • When you sell your home you have to repay the equity loan plus a share of any increase in the value. Please see example below:

Home bought for £250,000, sold for £300,000

Increase in value 20%
Equity loan repayment £60,000 (£50,000 + 20% profit)
Mortgage £187,500 (less capital repayments)
Your share when sold at least £52,500
  • The remaining £52,500 (or more) can be used a deposit on your next home.
  • The exact amount depends on how much you’ve paid off your mortgage.

This scheme is available in England only. The Scottish Government, Welsh Government and Northern Ireland Housing Executive run similar schemes – check out their websites.

For any other information on the help to buy equity loan schemes please call our expert advisors to help you further.

Shared Ownership

The shared ownership scheme was introduced by the government to help families on lower incomes to become home owners.

Shared ownership homes are provided through the housing association. They work by offing buyers a share of the property ownership and then paying rent on the remaining share. Typically you can buy between 25% and 75% share.

You’ll need a mortgage to help buy the share of the property, but much like the government’s help to buy scheme you can put a smaller than average deposit down, a lot of the time you will only require a 5% deposit instead of forking out a much larger deposit like 10% - 20%. This is based only the part of the property that you are purchasing and not the full price.

Over time, buyers have the opportunity to increase the share of the property they own, either by borrowing more from the lender and increasing the size of their mortgage or by making a large cash payment, this process is known as “Staircasing”.

Forces Help To Buy

This scheme is designed to help you get on the property ladder, If you’re a regular serviceman or servicewoman in the armed forces, the Forces Help to Buy scheme could let you borrow up to 50% of your salary to a maximum of £25,000, interest free. This loan is for buying your first home or moving to another property on assignment or as your family’s needs change.

All regular service personnel are eligible who:

  • Have completed the pre-requisite length of service
  • Have more than 6 months left to serve at the time they apply
  • Meet the right medical categories.

However, there might be instances where exceptions to the standard rules may be justifiable, especially where you have extenuating medical and personal circumstances. Approval for the FHTB is no guarantee that a mortgage lender will accept the full mortgage application, fortunately most mainstream lenders now accept this scheme but this is something we have vast experience within so of course we will confirm with yourself and the lender before progressing with any formal mortgage application.

With this scheme it can also be used in conjunction with the Help to Buy Equity Loan scheme, for any more information please call us to discuss what options you have.

Our professional fees for New Build mortgages

For establishing your needs, undertaking research and making a recommendation, we typically charge a fee of £295 on submission of the mortgage application. These fees may be waived for existing clients.

For more complex cases, for example adverse credit, self employed or homes of multiple occupancy, we typically charge a fee of 1% of the loan amount. For example if the loan is £80,000 our fee would be £800.

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