New build mortgage

jburnett84

Hi,

I'm looking into buying a new build property in my area.
I'm unsure how a mortgage works with a new build or how to go about getting one. Someone said to me that I'll need a 40% deposit??? Also the builders have said I have to pay a 5% deposit to them, so is that on top of any deposit I'm required to pay the mortgage company?
Sorry if this is really basic questions but any help would be much appreciated.

Building_Surveyor

If your going on one of the government schemes I.e help to buy then you need atleast 5%. That's if the house is on that scheme. If not then depending on whether its a flat or house lenders normally restrict lending to about 85% Ltv on new builds from memory (don't quote me on that). Providing you meet criteria.

Who said you need 40% deposit? Bank? Broker? Man in the pub?

kingstreet

You don't pay any deposit to a builder or to a mortgage lender. When you choose a property, you pay a reservation fee and this is refunded back to you on completion.

Deposits are paid to a solicitor of your choice, close to exchange of contracts, the point you become legally obliged to purchase the property.

Lenders typically lend less on newbuilds. The normal maximum is 80% to 85% on newbuild houses, and 65% to 75% on newbuild flats.

This would mean you could require a deposit of upto 35% with a combination of newbuild flat and wrong lender!

Government schemes, such as Help To Buy and NewBuy allow you to purchase a newbuild property with a deposit from you of as little as 5%. One is a 95% scheme, the other an "equity loan" which is used to supplement your deposit.

I suggest you spend some time researching these options to arm yourself against the rubbish you seem to be hearing at the moment.

Many builders have mortgage brokers on hand to help you understand the terminology and to guide you through the different schemes available to find the right option for you. I suggest you contact a few to get a view of what's possible for you.

jburnett84

Thanks for your replies.

It's a new build house that we are looking into, so will aim to get a 15% deposit saved up.
I spoke to someone who is also buying a new build house who mentioned he needed a 40% deposit. I'm going to contact a mortgage broker to go through my options with me.

Thanks again

Simon_gloster

But that persons circumstances will be different to yours so don't go by what they have to do, concentrate 100% on yourself. It does sound like they have cone up trumps negatively in their application. Ignore their problems and concentrate on your own.

kingstreet

jburnett84 wrote: »

I spoke to someone who is also buying a new build house who mentioned he needed a 40% deposit

We can't plan for someone's individual situation determining that a 40% deposit is required, but typically, as mentioned a 15% deposit is needed for a newbuild house and 25% for a newbuild flat.