Buying a New-Build Home: A Complete Guide
New build properties are a brilliant option for those seeking an affordable way of buying a home, whether you’re a first time buyer or you want a larger property for a growing family. But when it comes to buying a new build home, there are a few things that buyers may not be aware of.
There are several ways buying a new build home can go wrong if you’re not careful, so it pays to do your research well in advance and ask the right questions along the way to make sure you’re buying a property that’s worth your money.
In our new build home guide, we explain every stage of the process, from the benefits of choosing a new build home to how to negotiate your purchase price and the difference between freehold and leasehold, to help you avoid the most common pitfalls.
The COVID-19 pandemic has impacted all aspects of the property market, including new build homes. In the first section of our new build home guide, we highlight how coronavirus has affected new builds and what to expect going forward.
What constitutes a new build property and why should you consider buying a new build home? We highlight the criteria a new build needs to meet in order to be categorised as a true new build.
There are many advantages to choosing a new build home, from the energy-efficiency of these properties to the fixtures which are included. In this section of our new build home guide, we explain the key benefits to purchasing a new build property.
A new build home can come with various added features, from appliances to flooring and double glazing. But the list can vary – we highlight a few of the things that may be included in your new build property.
The price advertised for a new build home isn’t necessarily the price you should pay. We explain why you should negotiate on your house price and the factors that determine whether you’ll be successful.
New build premiums can be confusing, especially for first time buyers. But what does this term mean? In this section of our guide, we decode this terminology.
Buying a new build home comes with several steps, from assessing your financial situation to applying for a mortgage and finding a solicitor. We outline the different steps you can expect when you begin the process of purchasing a new build property.
Does a new build purchase differ from a standard property with regards to the deposit required? In this section of our new build guide, we highlight what buyers can expect to need in terms of a deposit.
When purchasing a new build property, you will encounter freehold and leasehold homes. In this section, we explain what freehold and leasehold terms mean, and what to watch out for when buying a new build home.
There are different schemes available to help buyers purchase property in the UK. We outline a few of the most popular buying schemes to help first time buyers get on the property ladder.
When you buy a property with an independent property developer, there are several questions you should ask to ensure that they are reliable and produce high quality work. We outline what you should look for when seeking out a developer to ensure you’re investing your money wisely.
Once you’ve moved into your new home, there are a few things to take care of before you can really settle in. In the final section of our guide, we’ll point out what you need to consider after you’ve moved in.
Buying a New-Build home during Coronavirus
In 2020, the number of new build properties being built dropped by 23% as a result of the pandemic and subsequent delays. The lowest figures for building occurred between April and June, during the first national lockdown.
But since the initial panic surrounding COVID-19, output on building sites has since recovered and is now at pre-pandemic levels. The demand for new build properties has stayed strong and some of the more prominent developers have sold properties in advance of the summer. For those looking to buy a new build property, there are still developments taking place and opportunities to be had, in spite of coronavirus.
1: What is a New-Build?
So, what is a new build home? A new build property is one which has never been lived in before and is completely brand new. There’s been a huge amount of emphasis placed on building more properties in the UK over the coming years to make up for the national property shortage.
The government has stated that there are plans for 300,000 new homes to be built by the mid-2020s. But when considering ‘what is a new build?’, bear in mind that some buildings are listed as new builds and may seem new in terms of their appearance, but have actually been owned before. These properties are not new builds in the context of this guide or new build property schemes.
2: The benefits of buying a New-Build
Why buy a new build house? There are several benefits of buying a new build home, not least that it’s a property that requires little maintenance as you, as the first buyer, will be the only person to have lived in it.
For many people, the opportunity to live in a brand new home is a great advantage and would otherwise be financially unattainable. The energy costs to run a new build property are also often cheaper, as these buildings are built with insulation and energy-efficiency in mind.
One of the many benefits of buying a new build is that, if you require financial help to get on the property ladder, there are schemes available from the government which can help you. Another advantage is that if you’re buying off-plan – buying before the property has been completed – then you may have the option of choosing certain features of the property, such as flooring colours or cupboard designs.
3: What’s included in a New-Build property?
New build homes offer numerous benefits, including the fact that many of the fixtures you’d normally have to buy separately are included. But what’s included in a new build house?
The exact features included will vary depending on who the developer is, as developers provide different offers and may even try to upsell certain items. What is included in a new build house can include a washing machine, a dishwasher, cabinetry and either wooden flooring or carpets throughout.
As part of modern regulations, developers have to make properties energy-efficient. This will make your home cheaper to run, so you can ensure that new build properties have double glazing, insulation and other features included to help make the property as energy-efficient as possible.
4: How to negotiate a New-Build house price
You’ll often see asking prices on new properties, but can you negotiate on a new build house price? With a standard property, you may have the option to offer a lower price, so how does negotiating on a new build differ? While developers will say that the price listed is the price you need to pay, knowing how to negotiate a new build house price could save you a fair bit of money.
While you can’t guarantee you’ll be successful, there are a few factors that will determine whether a developer will accept your negotiated price. If it’s in the early stages, there may be a deal that can be done as the developer might need funding to continue the project, which can go in your favour as a buyer.
Likewise, if it’s near completion and there is still no buyer in place, you may be able to strike a deal. The demand for the property and where it’s located will also affect your success. If you can’t get a lower price on the property itself, you may still be able to save costs by asking the developer to cover your stamp duty or added extras like furniture for free instead.
Make sure you do your research and understand what similar properties are being sold for, as without this knowledge, you could wind up paying more than the property is worth and this can affect your equity in the future.
5: What are premiums?
You may have heard about premiums on new build houses and wondered what it refers to. So, what is a new build premium? This term refers to the fact that new build homes are usually more expensive than older properties, even when they are similar in style or size.
There are several reasons why you pay a premium on new builds, from the fact that everything in the property is brand new to the energy-efficiency of the home and that everything could be built to a high specification.
On top of these premiums, some believe that developers also place a Help to Buy premium on new build homes. It’s important to always do your research and try to stay level-headed when viewing properties so you don’t pay more than you can afford.
6: How to buy a New-Build property
When it comes to how to buy a new build house, there are a few steps in the process. First, you need to ensure that your finances are in order so that you can assess how much you can afford to spend.
When it comes to how to buy a new build home, a mortgage broker can help you with the financial aspect of the process. They will run an affordability check with you so you’ll have a clear understanding of your budget and the properties you can afford to look at. It can also be helpful to get a mortgage agreement in principle (AiP) before you begin your property search, especially if you’re a first time buyer. This will show developers that your mortgage provider will, in principle, lend you the amount you need to buy the property.
You then need to find your ideal home, which involves finding a development you like. If you also want to utilise the Help to Buy equity loan scheme, you will need to ensure the development is participating in that scheme. As part of your process to find the right development, you should research the area and local amenities, as well as the developer’s track record and experience.
Depending on what stage of the development process you’re viewing at, you may be shown around the home itself or a marketing suite which will replicate the property you would be buying once it’s built.
When you’ve found a property you like, you can make an offer and pay a reservation fee which is usually between £500 and £1,000. This fee is deducted from your final purchase price when the purchase completes, although it’s non-refundable if you decide to pull out. You don’t necessarily need to offer the asking price and you can negotiate for a better deal. If the offer is accepted, you can move on to the next stage which is organising legal and financial support.
You will need to appoint a conveyancing solicitor to deal with your property purchase, ideally one who has experience handling new build purchases. They will handle everything from the legal documents required for the sale to checking the developer has gained planning permission for the home, and negotiating your move in date. You will also need to look into how to get a mortgage for a new build, as this can sometimes be a bit trickier than with a standard purchase.
Some mortgage lenders have stricter criteria for new builds, meaning they may restrict the amount you can borrow to 85% of the value of a new build house or 75% for a flat. A mortgage broker can help you find the right deal for your financial situation, as they have access to the whole market and know which lenders are happy to lend on new build properties.
Your mortgage offer will be valid for 6 months, but this can be an issue for homes that are not yet built, as the projected completion date may change. Some lenders offer extensions to offers or can provide a longer validation period but this is not the norm, so do your research and speak with a professional who can help you in this situation.
Before you complete on your purchase, you should also get a snagging survey arranged. This survey highlights any issues with the property that fall short of warranty standards or breach building regulations, as well as identify which areas of the build are still outstanding. Some developers won’t allow a snagging survey to be carried out until the work is completed, so if this is the case, you will need to book the survey as soon as you move in.
On a new build property, you will exchange contracts before you move into the property, which means you pay your deposit via your solicitor and agree on a date. With a new build home, you will have a short-stop date – the date the developer expects to complete building works – as well as a long-stop date – the date the home has to be completed by. These dates can change depending on a number of factors, so having a good solicitor on your side can be extremely beneficial in these situations.
7: How much deposit do you need for a New-Build house?
Saving for a deposit is one of the biggest challenges when purchasing a home, so it’s understandable that one of the biggest questions buyers have is: how much deposit is needed for a new build house?
Buyers normally need to pay a deposit of between 10% and 30% of the total purchase price when they exchange, which is paid to the developer’s solicitor. The buyer may also need to sign the contract to agree to buy the property at the agreed price and to pay the balance on completion.
However, there is an issue for buyers because the property valuations carried out by the mortgage provider are typically carried out at the beginning of the new build process, and after the construction has been completed.
So, if the property price falls within that period, and the buyer cannot secure a mortgage for the remaining balance, the deposit can be lost as a result of a breach of contract. It’s advised, in this case, that prospective buyers establish that the contract price is fixed at exchange so that whether property prices rise or fall, the purchase price remains the same.
New build warranties can usually protect a full deposit against developer insolvency, but often this is only for the first 10% of the total amount. If the completion date is delayed unreasonably for more than 6 months, the buyer also has the right to withdraw from the purchase and claim a refund.
8: Freehold vs Leasehold
Understanding the difference between freehold and leasehold is important when buying any property, including a new build. A leasehold property means you typically pay ground rent to your freeholder – this is normally the case for flats. The reason for this is that with a leasehold property, you own the dwelling but you don’t own the land it is built on.
The leasehold is for a set period of time before it passes back to the freeholder, who owns the land. Houses are usually freehold, meaning you own the building and the land it’s built on.
However, in recent years, a large proportion of new build houses were sold as new build leasehold properties. In June 2019, the government announced there would be a ban on new build freeholds being sold as leaseholds, but the legislation for this has yet to be passed as a law.
When purchasing a property, be sure to check the contract regarding whether it is a leasehold or freehold home. There is no justification for a developer to retain the freehold if there is only one property built on the land, as is the case for a house, so buyers should avoid purchasing a property if this is the case.
9: New-Build buying options and schemes
There are several first time buyer new build schemes and buying options to choose from if you’re a buyer in need of assistance to help you get on the property ladder.
New build government schemes, such as the Help to Buy equity loan scheme, make it easier to buy a new build home. The Help to Buy equity loan scheme enables first time buyers to buy a new build property up to the value of £600,000 with only a 5% deposit, coupled with a 20% interest-free equity loan from the government (40% for those in London). The remainder of the balance is covered by a 75% mortgage.
If you can’t afford to buy a home outright, another option is shared ownership, which enables buyers to purchase part of a home and pay a discounted rent on the remainder.
10: Independent property developers
Private new build developers can be found around the country, but it’s important to do your research thoroughly when choosing a developer for your property. Look at developers in the area where you want to purchase a home and get to know them, from reviews left on forums from previous buyers to examples of their past work. You want to spend money with a developer that has a strong reputation for producing high quality properties. Forums are a good way to get to know what you’re getting into when buying from independent property developers, so you can know what to expect and whether it’s worth your investment.
If possible, enquire with the developers to see if it’s possible to inspect homes that they’ve built elsewhere and talk to previous owners if you can, who can be a valuable source of information.
You should also look into the validity of any guarantees they offer and the key dates for completion. What does the proposed construction programme look like? Do they request a phased payment plan? These are questions you should be investigating as a buyer to ensure that the developer is reliable.
11: After you’ve moved in
After contracts have been exchanged and you’ve been handed the keys to your property, you can officially move into your new home. But there are a few things to take care of before you can settle in. In addition to checking that everything is working as it should be, you will need to set up utility accounts and register your address:
Organising your utilities
Check the meter readings for your utilities so you can set up accounts for your water, electricity and gas supplies. You should also take a note of the serial numbers for your meters, to ensure that there are no mix ups with your neighbours.
Getting broadband and phone lines
It can take several weeks for an engineer to visit your property to set up your internet and telephone line, so book an appointment as soon as possible so that you’re not without broadband access longer than you need to be.
Registering a new-build address
A new home comes with a new address which businesses might not have registered in their databases. Your builder should contact the local council to get a postcode and address created, which will go live when the Royal Mail are informed of it and add it to their database. Check that your address has been registered as soon as you move in, as you might have a problem getting insurance without it.
Find out more
Buying a new home is an exciting time, but it’s also a long process that can be overwhelming. Town & Country Mortgage Services can help. Our experienced team are on hand to offer advice, guidance and support when purchasing a new build property. We have access to a wide range of lenders and can help you find the right mortgage deal for your circumstances. Get in touch today.