Written by: Mobeen Akram - National New Homes Account Director
According to data from Mortgage Advice Bureau (MAB)’s app 1, the appeal of new builds surged in 2024, with 53% of homebuyers in England looking to buy new. It’s clear to see why there has been an increase in popularity, with so many incentive schemes now being offered by developers
There’s no denying that new builds are more expensive than second-hand properties, but with the right financial support, buying a new build could be more achievable than you think.
Let’s take a look at the different new build incentive schemes that are available.
Government schemes
Whether you’re a first time buyer or you’re looking to move home, there are government schemes which are specifically geared towards supporting you to finance your new build purchase.
Lifetime ISA
Although this isn’t actually a new build specific scheme, it's still worthwhile mentioning the government’s Lifetime ISA incentive. This is a fantastic opportunity to boost your savings as you can pay up to £4,000 each year into the account, and receive a 25% bonus from the government, for free! As long as you’re over 18 years old, and under 40, you can open a Lifetime ISA (you can actually keep paying into it until you’re 50).
Shared Ownership
With Shared Ownership, you buy a share of the property’s market value, anywhere between 10-75%, and pay rent to the landlord for the remaining share.
In this case, the landlord may be the housing association, local council, or other organisation. If affordability is a concern, this could be a way to get your foot onto the housing ladder, and start your homeownership journey.
You can buy more shares as you go, and you have the option of selling your Shared Ownership home at any time.
If you own 100% of the home, you can sell it via the open market. If you do not own 100% of the property, you must inform your landlord of your intent to sell.
First Homes
If you’re a first time buyer, you may have the option of buying a new build for 30-50% less than its market value. There are some eligibility criteria, with the most significant being financial requirements. You must be able to get a mortgage for at least half the price of the home and your combined household income must not exceed £80,000 (£90,000 in London).
Some councils may prioritise the allocation of First Homes discounts to essential workers, those on lower incomes, or people who already live in the area.
Ultimately, it's worth exploring as an option, as it could get you onto the property ladder sooner than expected.
Builder incentive schemes
While there are a few government incentive schemes available to help you buy a new build house, there are plenty of developer-led initiatives available too.
If you’re buying a new build direct from a developer, they might offer an array of interesting incentives to sign off on a deal. These can include anything from a boost to your deposit, part-exchange deals, or even covering your moving costs.
Part exchange your house
Getting stuck in the homebuying chain can be frustrating, so many builders are now offering to help with the sale of your existing home.
If you want to buy a new build, your developer may offer a part-exchange deal where they purchase your home from you and sell it on themselves. The major advantage to this is the fact that you have a guaranteed sale. There is also no need to deal with estate agents, arrange viewings, or negotiate with multiple potential buyers, which can simplify the whole process.
To have the chance of qualifying for a part-exchange deal, you need to be a current homeowner and you must be moving to a new build home. In addition, each developer will most likely have their own set of terms for these transactions.
Own New
The incentive scheme, Own New Rate Reducer, is a mortgage option that gives you the opportunity to buy a new build at reduced interest rates, depending on your deposit amount. These lower interest rates are valid for a fixed period, usually two-five years, but check with your mortgage adviser first as only a few lenders currently offer the scheme.
Own New is also available to all homeowners, making it an attractive option for existing homeowners as well as first time buyers.
Deposit paid
The builder may offer you a cash incentive to help fund your deposit, or pay for other costs involved in moving house. These cash incentives are paid to your solicitor on completion and will need to be declared to your lender if you’re applying for a mortgage.
Cash incentives can be up to 5% of the purchase price of your new build home.
Stamp duty and other costs
Many builders offer discounts on the buyer's costs of purchasing a new build home, and part of this could include a contribution towards Stamp Duty and legal fees, white goods for the kitchen, or garden landscaping. These may all be paid for as an extra incentive to prospective new build buyers and may very well be the cherry on top which gets them a sale.
Getting expert advice for new build mortgages
Deputy CEO of Mortgage Advice Bureau, Ben Thompson comments:
“Our data - and wider economic conditions - indicate that buyer confidence in the new build market is on the rise, and I would hope this further encourages the government to significantly accelerate the level of housebuilding in the UK. There’s never been a better time to get mortgage ready with the support of a broker. Given their expertise in the new build market, they’ll offer guidance and insight to find out if it’s the right option for you."
No matter where you are in your homebuying journey, we’re on hand to help you achieve your dreams of homeownership.
Get in touch with us today and let’s discuss your options for buying a new build.
We can help you assess your affordability, highlight suitable incentive schemes, and get the ball rolling on securing a mortgage.
References:
1. My MAB App, 2024
Frequently asked questions
Yes you can, but it’s less common than with second-hand properties. Builders are more likely to offer you incentives to secure the sale, rather than discount the price of the property.
Just before you move in, it’s recommended you make a snagging list of all the outstanding issues that the builder needs to rectify, such as paint runs or blemishes, gaps around doors, faulty brickwork etc. You can either make the list yourself or hire a professional snagging surveyor for a thorough inspection of the property.
New build homes are perfect for those who are conscious of their carbon footprint and want to reduce money on household energy bills, and green mortgages support this ethos as they offer low interest rates or other financial incentives to those who purchase energy-efficient homes. Find out more about green mortgages here.
The Homebuilders Federation (HBF) is the representative body of the home building industry in England and Wales and has a plethora of information for anyone interested in buying a new build home.
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7 steps to buying a new build
Modern living and new beginnings: should I buy a new build?
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
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