If you’re in the market for a new home, but don’t want the renovation costs and potential repair bills that come with an older property, then buying a new build could be the way to go.
Newly built homes cater for all buyers and all budgets, offering the ideal solution for first-time buyers and families, as well as anyone looking to upsize or downsize, but buying new is not without its pitfalls.
Here’s all you need to know about buying a new-build, including how new-build mortgages work, as well as all the pros and cons.
What is a ‘new build’ property
As the name suggests, a ‘new-build’ home is simply a property that has been built recently and, as the buyer, you’ll be its very first owner. There are a range of benefits that come with buying a new build, not least the fact that you can usually select the fixtures and fittings to suit your tastes, and they’re less likely to need the same amount of maintenance or repairs as an older property.
You may also have the option to buy ‘off-plan’, which means you buy the property before its actually been built. This may sound risky, and you should always do your research on the developer before committing, but there are many benefits to buying off-plan, not least the fact that your new home could be worth significantly more than what you paid for it by the time you move in.
What is a ‘new build’ property
If you do buy off-plan, you may have to pay a reservation fee, which can be anything up to £1,000, before appointing a conveyancer to deal with the legal side of the house move.
You’ll then need to arrange a mortgage, which your lender base on a surveyor's valuation of the plans and development specification, before completing the paperwork, putting down your deposit and exchanging the contracts.
You’ll then be given two completion dates - the first being the ‘short stop’ date, when the developer expects to have the home finished, and the second being the ‘long stop’ date, when the must have it completed by. In the weeks leading up to the completion date, you should carry out a snagging survey, to check for any defects or work that either hasn’t been done, or hasn’t been done satisfactorily.
If you find you’re being encouraged to move in before the houses are finished, make sure you’re not pressured into doing so, else you could find the jobs on that snagging list are never completed - once you’re in, you’ll find you quickly slip down the construction company’s list of priorities.
What are the pros and cons of buying a new build?
There are many advantages to buying a new build, here is a list of the main plus points:
What are the advantages of buying a new build?
Help to buy scheme - If you’re a first-time buyer, you might be able to get a financial leg up the ladder via the Help to Buy scheme, which is a government loan you can combine with a deposit and a mortgage to buy a new-build property. New builds are also part of the Starter Homes Initiative, a government pilot scheme that offers buyers on a combined household income of less than £80,000 (£90,000 in London) the chance to buy new homes priced up to £250,000 (£450,000 in London) at below-market value. If you think you could be eligible for either, find out more from your mortgage advisor.
Covered by guarantees - All new build homes come with a 10-year National House Building Council (NHBC) warranty to cover structural defects, while most developers also provide their own two-year warranty. This means your repair costs should be covered if anything goes wrong within the first couple of years, something you don’t get with an older property.
No chains when buying - The buyer chain is one of the most stressful things about buying a house, particularly if you’re a first-time buyer whose move is put on hold because the seller your buying from has seen their move fall through. There is none of this hassle when buying a new build - as the first occupant, you simply move in as soon as it’s built.
Can personalise when under construction - New homes are built to high-specifications, and fitted with the latest boilers, double glazing and insulation to make them A-rated for energy efficiency. If you buy off-plan, you should even be able to choose from a range of fixtures and fittings, to personalise the house to your exact tastes.
So far, so good. But buying a new build home isn’t without its problems. Here are the main issues you might run into when buying a new build house:
Snagging - Everything in your home will be brand new and should be fitted to the highest standard, but you may well find some things aren’t quite up to scratch when you move in. It’s important to draw up a full snagging list to highlight any defects - no matter how trivial they seem - as soon as you move in, before passing it to the construction firm (remembering to keep a copy for yourself).
Make this your priority when moving in - ideally, you should get the list to the builders before they move off-site, if not you could find they become harder to contact and the work takes longer to complete.
Delays - Aside from ‘short stop’ and ‘long stop’ completion dates, there are several other milestones you need to keep a note of when buying a new build. It’s worth asking for a schedule of works at the outset, which details the overall build and who is responsible for what, and finding out when the ‘first fix’ (construction work before the plastering is done) and ‘second fix’ (connection of appliances, fixtures and fittings after the plastering is complete) dates are, to give you an idea of timeframes.
If any of these dates are missed, then there will be delays that will most likely mean you can’t move in on the date you planned to. Never move in before all of the work has been completed.
Expiration of mortgage agreement - If you’ve bought off-plan and there are any delays in building your house, this could see your mortgage offer expire. If this happens, you’ll need to arrange a new one as soon as possible, and this is where Post Office Money can help - check out our range of mortgages and tap into our mortgage calculator for more information.
Disruption to services - If you’re one of the first to move into the development, you could find yourself practically living on a building site until the rest of it is completed. You might also have issues with broadband, TV and even heating working, as the development infrastructure isn’t quite up to scratch.
And if your development has a brand-new postcode, you might have trouble entering your address in any forms or applications, especially online. You may also find the local postman has trouble finding your house.
How can I buy a new build house?
When it comes to the buying cycle, the best thing about buying a new build is that there is no chain - if you’re a first-time buyer you can simply pack up and move in, if you’ve already got a foot on the ladder, you only need to worry about selling your house before you move in.
If you’ve seen the house of your dreams is being built or has just been completed, here’s how to go about buying a new build property:
Sort your finances - Work out how much you can reasonably afford, then make an appointment with a qualified mortgage adviser to find out how much you’ll be able to borrow, so you know exactly what your price range is. At this point, it might also be worth getting a mortgage agreement in principle (AIP), particularly if you’re a first-time buyer, as you can use this to prove to the developer that you'll be able to afford the property.
Make an offer and pay the fees - With the mortgage agreement in place, you can now make an offer on the property. There’s a common misconception that while it’s normal to negotiate on the price of an existing or character property, there’s no wriggle room on the price of a new build - don’t be afraid to haggle with the developer.
Once your offer is accepted, you’ll need to pay a reservation fee - the good news is this is usually deducted, when you complete, the bad news it it’s also non-refundable if you decide to pull out. If the home you’re buying is worth more than £125,000, you’ll also have to pay stamp duty, at a rate of between 2% and 12%, depending upon its value.
Sort out a mortgage and a conveyancer - Once everything is moving along nicely, all the legal and financial stuff needs to be worked through. Appoint a conveyancer to deal with the legal side of things, such as checking that developer has been given proper planning permission and that the development has access to the necessary services, including roads and sewers. You should now start applying for mortgages, and your conveyancer should also be able sort out the date you’re handed the keys, and manage the funds to buy the property.
And then it’s just a case of waiting to move in. When sorting the mortgage, you might find getting one for a new-build isn’t as straightforward as getting one for an older property, as lenders generally impose stricter limits, which mean you may be restricted to borrowing 85% of the value of a new-build house, or 75% on a flat.
At Post Office, we understand that everyone’s situation is different. That is why we have teamed up with Bank of Ireland UK to offer a new mortgage range that could work for you. Use our mortgage calculator to get an estimate of how much you could borrow, or find out more on mortgages at Post Office Money.