Buying a new-build home is appealing for lots of reasons. You can look forward to moving into a brand new home that has never been lived in before. A new build is energy efficient so you can save on your energy bills compared with an older property. It will come with a 10-year warranty, giving you peace of mind that any defects will be taken care of by the developer.
But what about financing your purchase? Is any financial help available when buying a new build? The good news is that there are various schemes to help you fund the purchase and the developer will more than likely offer you incentives too.
Developer incentives
Developers usually offer incentives to encourage buyers to have one of their new-build properties. These incentives can help you financially in different ways, such as:
- Offering a part-exchange deal for your current home
- Providing a cash incentive towards your deposit
- Giving you a free package for the soft furnishings
- Offering free upgrades for the appliances and flooring
- Paying your legal fees
- Covering your stamp duty costs
- Providing you with travel cards for the local area
- Covering your moving costs
Deposit Unlock
As a collaboration between lenders and the home-building industry, Deposit Unlock enables you to buy a new-build home with just a 5% deposit. This scheme is open to first-time buyers and existing homeowners.
The developer has to be part of the scheme and pays the lender some mortgage insurance upon completion of the purchase. This reduces the risk for the lender and, in return, the lender offers a 95% mortgage at a competitive rate. Some lenders also provide incentives, such as a free valuation or no arrangement fee to pay.
The First Homes scheme
Designed to help first-time buyers get on to the property ladder in their local area, the First Homes scheme offers a 30–50% discount on a property’s market value. Key workers are also prioritised as are those serving in the armed forces and recent veterans.
Available in England, your combined income mustn’t exceed £80,000 (or £90,000 in London). Property prices are capped at £250,000, or £420,000 in London, although local councils can lower this cap at their discretion.
To be eligible, you need to pay a 5% deposit of the balance of the property price after the discount has been taken into account. You also need to secure a mortgage for at least 50% of the discounted price.
Shared ownership
If you want to get on the property ladder but are unable to buy a home outright, shared ownership provides a compromise between renting and buying. This involves buying a share of the new-build property, usually between 25% and 75% of its market value. You then pay rent at a discounted rate for the remaining share to the housing association or developer that owns it.
As you only need to pay a deposit and arrange a mortgage for the share you wish to buy, this makes shared ownership a feasible option if home ownership is otherwise eluding you. If you’re able to afford more in the future, you can increase your share in your new-build home.
The 95% mortgage guarantee scheme
Originally set to close for applications at the end of December 2022, the 95% mortgage guarantee scheme has been extended twice. It is now available until the end of June 2025. This government-backed scheme provides a guarantee to lenders that some of the costs will be covered if a buyer defaults on their mortgage. This reduces the risk for lenders so that they can offer a 95% mortgage.
This scheme is available to existing homeowners as well as first-time buyers for properties up to a value of £600,000. To take advantage of this scheme, you need to pay a 5% deposit and arrange a repayment mortgage with a fixed rate.
Own New
Own New offers two products to help both first-time buyers and existing homeowners buy a new-build home. Deposit Drop enables you to buy a property with a 5% deposit and a standard mortgage that’s arranged via a participating lender. Rate Reducer allows you to make lower monthly payments for an agreed term of either 2 or 5 years. The scheme is a collaboration between home builders and lenders to make buying a new build much more affordable.
What about building a new home instead of buying a new build?
If you’re looking for financial help to build your new home instead of buying one, the Help to Build: Equity Loan scheme is a good option. To benefit from this, you need to pay a 5% deposit and arrange a self-build mortgage. The government provides an equity loan of up to 20% of the total estimated costs of your self-build project. The equity loan is up to 40% in London. This is interest-free for the first 5 years.
Available in England, you can take advantage of Help to Build if you’re a first-time buyer or an existing homeowner. It applies up to a maximum spend of £600,000, including the cost of buying a plot of land if you don’t already own one. The build itself mustn’t cost more than £400,000.
We can arrange your new build mortgage
As you can see, there are lots of options if you need financial help to buy a new-build home. To discuss them further and check your eligibility, give our mortgage brokers a call on 01322 907 000. Once you’ve settled on your preferred choice, we can arrange your new build mortgage. As well as that, we can ensure that your new home is protected with new build home insurance.