A guide to buying a new-build home
Buying a new-build home is a slightly different process to buying an older property.
There are many benefits to buying a new-build property, including:
- An NHBC warranty (a ten year guarantee which gives you protection against structural issues with the property).
- Generally lower maintenance costs (compared with an older house).
- The option to choose parts of the house design (in its building stages).
- There is no ‘chain’ and you can move in straight-away when the property is ready.
- Many of the fixtures and fittings are included in the house price.
- Lower energy bills because of energy-efficient heating, triple-glazed windows, insulated walls and roofs.
That said, there are a few negatives to buying a new-build home. There may be snagging issues, settlement issues, problems with fixtures and fittings being installed incorrectly, and the seller may also try to overprice extra items as part of the sale such as carpets and garden turf. In many cases, it is cheaper to buy these elsewhere yourself rather than have them installed by the developer. Developers also charge more for new-builds because of a ‘new-build premium’. This ‘premium’ is that everything in the property is brand new with no previous owner, and that the house has (in theory), been built to a higher specification than older homes.
Can I negotiate on a new-build price?
It is important to remember that the developer’s price for a new-build is only an asking price. You do not have to pay this price and can negotiate. The difficulty in this however is that new-builds are typically very high in demand, and you may find that someone else is prepared to pay the full asking price, quickly taking a property off of the market. Check your budget before negotiating and ask yourself if you really can afford the property.
Success in negotiating with a developer will also depend on how far along the general housing site is in development, its location and the general housing demand. If you can’t get a deal done, you could ask the developer if they would be prepared to cover your stamp duty or reduce your other costs such as legal fees, or throw in added extras such as appliances or carpets if you were to pay the full asking price. It’s always a lottery as to whether the developer will agree to this, but it is always worth asking.
How do I purchase a new-build property?
1. Check your finances
A first step is to get in touch with us at iam Mortgages, so that we can give you advice and guidance on the best mortgage deal for you. We’ll need a few details, such as the type of new-build you intend to buy, and the amount of deposit you could put down. You can then get a clearer idea of how much you can realistically afford before you risk getting ‘wowed’ by a show home that is miles outside of your budget. We also recommend getting an Agreement in Principle, as this demonstrates to lenders that you are serious about purchasing a property, especially if you are a first-time buyer.
2. Get house-hunting!
The next step is to find that dream new-build. If you are buying a property using the Help to Buy government scheme, check with the developer that they are offering new-builds that are covered by the scheme. Make sure you also research the developer and assess feedback on properties they have constructed. When you visit a new-build site, you will be taken around a ‘show home’ that will look like the property you intend to purchase. Bear in mind however that developers often make this show home to the highest specification so that they maximise the chances of selling properties. It is likely that your home will differ slightly from the show home, so try to keep an open mind.
3. Reserving your plot
When you have seen the show home and are happy with the location and look of your new-build and it’s plot, you’ll need to make an offer. When this offer has been accepted by the developer, you’ll have to pay a reservation fee to take the property off the market. This can be anywhere between £500-£1000. Depending on the developer, this fee might need to be made either upfront, or removed from the final house purchase price. The majority of developers will state that this fee is non-refundable should you change your mind, so think very carefully and make sure you are happy to proceed before reserving a new-build.
4. Appointing a conveyancer
You’re on your way to owning a brand new home! The next step is to hire a solicitor (conveyancer) who will handle the legal aspects of your house purchase. They will check for things such as planning permission, and do checks on the land to make sure the developer has connected the property to sewers and that it has suitable drainage, etc. Your solicitor will also negotiate the day of exchange and completion with the developer, and handle the money so that you can pay for the property.
5. Moving in to your new home
As is the case with new-builds, customers often see them when they are in a phase of construction. When you have bought your property, you might not necessarily be able to move in right away – it will depend upon the phase of the development. The developer should be in contact with your solicitor to confirm when the property is habitable and you can officially move in.
Finding a mortgage for a new-build property
Securing a mortgage deal with a lender for a new-build property can be more difficult than an older property. Some lenders may place restrictions on the overall amount that you can borrow, so you may only be able to borrow 75%, meaning finding a 25% deposit. It is also important to remember that a mortgage offer typically lasts up to six months. In the case of ‘slow-build’ developers, it can take this amount of time for a new-build property to be constructed. Discuss the estimated completion date with the developer when you visit the site. Some lenders may extend the timing of their mortgage offer to allow more time for your intended property to be built, but not all lenders will do this.
If you would like help finding the right mortgage deal for your new-build home, speak to our impartial mortgage advisors at iam Mortgages. We will happily talk through your options so that you can find the best deal for your circumstances. Give us a call or fill in our online enquiry form, and we’ll get back to you with our free advice.