New Build Mortgages

Getting a mortgage on a new-build property can be more challenging than for existing homes. Lender policies on new builds vary significantly, with some possibly declining applications, while others may be more accommodating. The availability and terms of mortgages for new builds are not uniform across all lenders.

Mortgages for new build properties are not generally more expensive as they can be accepted on standard products. Lenders can perceive these mortgages as having a higher risk due to the potential for the property’s value to decrease initially, therefore these can require higher deposits.

There is no single minimum deposit for a new-build mortgage. Maximum LTV varies by lender, property type and scheme; some eligible new-build buyers can access products requiring a 5% deposit.

Accepted new-home warranties vary by lender. Your conveyancer and mortgage adviser should check the proposed warranty against the chosen lender’s current requirements.

Developer incentives can impact your mortgage. Incentives valued at less than 5% of the property price usually don’t cause issues. However, incentives exceeding 5% can lead to a higher loan-to-value ratio, potentially resulting in increased interest rates. It’s important to assess if an incentive truly benefits you financially.

Several schemes assist with buying a new build, including:

• First Homes: Offers a 30% to 50% discount on new build homes for first-time buyers and key workers in England, with income and property value caps.
• Shared Ownership: Allows purchasing a share of a new build and paying rent on the remainder, for those unable to afford the full price.
• Lifetime ISA: A savings account for under-40s saving for a first home, with a 25% annual government bonus.
• Mortgage Guarantee Scheme: The permanent scheme, available from July 2025, supports participating lenders in offering eligible 91%–95% LTV mortgages to first-time buyers and home movers.
• Deposit Unlock: Enables purchasing a new build from participating builders with a 5% deposit, through mortgages from participating lenders.
• The Help to Buy: Equity Loan scheme ended on 31 March 2023 but was previously a popular option for first-time buyers.

The key difference between freehold and leasehold properties lies in land ownership.

In a leasehold arrangement, you own the property but not the land it’s on, leading to ground rent payments to the freeholder. This setup is typical for flats. Leaseholds expire after a set period, reverting ownership to the freeholder.

Houses are traditionally freehold, meaning you own both the property and the land.

The Leasehold and Freehold Reform Act 2024 includes provisions restricting the sale of new leasehold houses, subject to permitted exceptions.

It’s crucial to verify the property’s status before purchase, as buying a leasehold house when a single property occupies the land may not be advisable.

Getting a mortgage for a new build flat can be more challenging compared to houses, with some lenders offering only up to 85% of the property’s value.

Despite flats sometimes being more affordable, lenders perceive them as riskier, especially new-build flats, due to potential difficulties in resale if repossession occurs. The presence of unsold units in the development can further devalue previously occupied flats, complicating the lender’s ability to recover funds.

A shared ownership mortgage is designed for buyers participating in the Shared Ownership scheme, which aims to make home buying more accessible.

Under this scheme, you can purchase as little as a 10% share of a home, with a deposit as low as 5% of your share, and pay rent on the remainder to a housing association or developer. This is also known as Part Buy, Part Rent, lowers the initial cost of homeownership. While many mainstream lenders offer shared ownership mortgages, availability varies, so comparing options is essential for securing the best deal.