Through Capricorn’s existing and growing relationships with some of the country’s largest new build developers and agents, it has allowed a certain number of our advisers (myself included) to obtain an in depth understanding and passion for this marketplace. We also have a great deal of experience in dealing with the challenges presented when purchasing a new build flat, and indeed obtaining the mortgage.
One of the largest obstacles encountered when compared to a standard, second hand, purchase, is the required deposit size. Whereas most lenders allow you to purchase with just a 10% deposit on the second hand market, lenders typically have separate criteria here for new build.
The majority of lenders stipulate that at least a 15% deposit be required for new build residential purchases, and for buy to let typically 25%+ is necessary.
With a 10% deposit Halifax come into the fold, but only through brokers on their selective ‘new build panel’. Fortunately, being one of Halifax’s largest introducers, Capricorn are on that panel, and can access this privileged criterion. Outside of the panel, Halifax restrict lending to 80% on new build flats.
With a 15% deposit, a few more lenders open their doors, such as HSBC (who are now working with selective intermediaries – including Capricorn), Accord Mortgages, and Principality.
There are some other notable mortgage considerations when looking at new build purchases, such as the lender’s exposure levels; some lenders may cap the number of units they lend on in any one development to 10-20% of the total apartments, so worthwhile getting your adviser to check beforehand.
Another consideration is to check whether your purchase is being made directly from the developer or via a third party, initial investor. This would be known as a ‘contract re-assignment’, whereby someone has bought a property some time ahead of completion, and then looks to sell that contract on prior to completing, usually for a profit (but not always the case!).
In this instance the options become very limited, as only a handful of lenders will finance the contract purchase. This is something which Capricorn have a great deal of experience with, so you’re in good hands, however typically you can borrow up to 75% of the new purchase price, or 80% of the original contract value (depending on the lender).
Buy-to-let is a separate matter, as the LTV is also impacted by the property rental valuation, and given that new build properties often yield less rent (due to being sold at a premium), borrowing as high as 70% can be difficult to obtain.
Fortunately, there are some lenders who have slightly more relaxed rental stress tests, or take a more holistic view on the applicant’s overall financial position, and so are able to offer higher loan to value lending.
As you can see, buying new build can be a bit of a minefield when it comes to getting a mortgage, so it’s best to seek help from a professional who has expertise in the area. To arrange a free consultation with one of Capricorn’s new build specialists, feel free to get in touch on 0208 834 1684 or firstname.lastname@example.org