New build mortgage

raysmith8

My son is trying to get a mortgage on a new build house.He only wants to put down a 10 percent deposit. He first tried his existing mortgage lender HSBC. They said they only do 90% on existing homes. On new builds the maximum was 85%. The local branch did not know the reason for the policy but said most lenders did the same. I cannot understand the rationale behind it. Has anybody come across this?

~Beanie~

Its quite common and is usually because new builds are generally overpriced and lose value quickly.

RenStar

Tell your son to look into Newbuy - https://www.newbuy.org.uk. Provided the developer is taking part and he has an excellent credit profile, he should be able to get 90-95% mortgage from a number of different lenders. However, HSBC don't offer NewBuy mortgages hence why he had no joy with them. Nationwide, Santander, Halifax, Natwest, Woolwich and Aldermore are lenders that do but most of them are only available via brokers.

Thrugelmir

New build selling prices hide discounts and inecntives that builders offer. So not reflective of true value.

kingstreet

RenStar wrote: »

Tell your son to look into Newbuy - https://www.newbuy.org.uk. Provided the developer is taking part and he has an excellent credit profile, he should be able to get 90-95% mortgage from a number of different lenders. However, HSBC don't offer NewBuy mortgages hence why he had no joy with them. Nationwide, Santander, Halifax, Natwest, Woolwich and Aldermore are lenders that do but most of them are only available via brokers.

Newbuy is limited to certain properties which may be ones the developer is having difficulty selling. The rates will not be as good as they could be for a "normal" 90% product.

Many builders offer a 5% gifted deposit and this, together with the borrower's own 10%, opens up the option of an 85% mortgage, which is within the newbuild maxima of most lenders.

RenStar

kingstreet wrote: »

Newbuy is limited to certain properties which may be ones the developer is having difficulty selling. The rates will not be as good as they could be for a "normal" 90% product.

Many builders offer a 5% gifted deposit and this, together with the borrower's own 10%, opens up the option of an 85% mortgage, which is within the newbuild maxima of most lenders.

Rates don't look that bad to me, loads of 2,3 and 5 year fixes under 5 and even 4.5%: http://www.money.co.uk/mortgages/newbuy-mortgages.htm

Also builders aren't allowed to restrict newbuy to certain plots only -

Home builders participating in NewBuy may not restrict the scheme to selected properties or sites. Instead it must be available for all new properties that are priced at £500,000 or less. However we do not expect all of a company’s properties to be sold under NewBuy – only those where the customer needs a 90-95% LTV mortgage. see: http://www.hbf.co.uk/policy-activities/government-policy/newbuy/2837/newbuy-for-home-builders/ under Key Selling Requirements.

Seems to be a lot of missinformation about Newbuy on this forum, just because you don't agree with something doesn't mean you should give out incorrect information about it!

kingstreet

Seems to be a lot of missinformation about Newbuy on this forum, just because you don't agree with something doesn't mean you should give out incorrect information about it!

I've done nothing of the kind! Please explain why you are presuming this is my position?

I'm recounting my personal experience, as an adviser on the Orbit panel. Builders offer newbuy on particular plots in my area and don't offer it on every property, probably if they think they don't have to.

I routinely deal with newbuy, homebuy, firstbuy and shared ownership resale business. I have a shared equity remortgage case on my desk as we speak.

In the OP's son's situation, a 10% personal deposit, plus a 5% builder gift would give the OP a potentially better property and mortgage deal, in my opinion - which is, after all, what we do here...

The OP is able to take both our views, process them and pass on the information and act on it as he/she sees fit.

RenStar

kingstreet wrote: »

I've done nothing of the kind! Please explain why you are presuming this is my position?

I'm recounting my personal experience, as an adviser on the Orbit panel. Builders offer newbuy on particular plots in my area and don't offer it on every property, probably if they think they don't have to.

I routinely deal with newbuy, homebuy, firstbuy and shared ownership resale business. I have a shared equity remortgage case on my desk as we speak.

In the OP's son's situation, a 10% personal deposit, plus a 5% builder gift would give the OP a potentially better property and mortgage deal, in my opinion - which is, after all, what we do here...

The OP is able to take both our views, process them and pass on the information and act on it as he/she sees fit.

Wasn't neccessarily aimed just at you, more my general observation of the sort of advice given here whenever anyone here mentions Newbuy. I've seen at least two other posts stating newbuy is only restricted to specific plots and that the rates are rubbish. It's doing my head in because that just simply isn't the case and the information is easily available. Sorry if my post came across as being specifically directed at you.

kingstreet

You'd quoted me, so I took it you were attributing those views to me. On the HBR&S board there is anti-newbuild sentiment and this can be increased with the likes of newbuy, shared equity and shared ownership. I don't think it's as bad on here.

If asked, I'll explain the benefits and disadvantages of all the schemes as I see them, but I don't have an inherent opposition.

In my opinion again, builders are less keen on newbuy because they have to make the payment into the indemnity scheme, whereas a builder's deposit is only a reduction in the price which affects them less as it's reflected in the pricing of the property.

Newbuy may get them a better mortgage rate, but I'd still back my 85% plan to produce a better overall deal. You never know though...