Putting your key into a shiny new lock and being the very first person to live in a brand-new property is just part of the pleasure of buying a new-build home. Forget lead water pipes, non-existent insulation, failing damp-proof courses and crumbling old pointing.
A spokesman for Morris Homes argues that new homes can cut ongoing maintenance costs and reduce stress because you should have a 10-year guarantee from the National House Building Council .
Made to measure
In an increasingly ‘green-conscious’ era, a home that conforms to modern building regulations and is more energy-efficient is an attractive proposition, as is a property that can be finished to suit your personal tastes from the outset.
“As well as the reduced costs of ownership, buyers have a huge amount of flexibility in choosing how their homes will look and feel,” according to Morris Homes. “It is important to create not only high-quality properties with specifications the buyer can choose, but properties that really can meet modern living needs in terms of their layout, size and use of space.” House Builders’ Federation research indicates that since older homes rarely have connecting rooms, up to 17 per cent of these properties’ total space can be wasted – so you could lose £25,000-worth of space in an average £150,000 home, argues Morris Homes.
But new-build houses have their share of critics too. Four out of five new-build homes are simply “mediocre”, says CABE, the Commission for Architecture and the Built Environment. Its experts would like to see more use of local materials to give character, better design, and less prominence given to parking and roads. Prospective buyers of new properties should be sure to check build quality, energy-efficiency, light-efficiency and security, experts warn, to make sure they get value for money.
“Both new-build and older properties can have problems,” sums up a spokesperson for the Royal Institute of Chartered Surveyors. “You need a survey whenever you buy a house, and a survey could actually save you money because you can negotiate on price or even decide not to buy if there are problems.”
Finding the finance
If you do decide to go for new-build, what are your finance options?
“There are a number of different options, ranging from builder incentives through to shared equity or ‘equity appreciation’, where you might buy a £100,000 property for £70,000, say, and the developer shares the appreciation in value,” says Kevin Paterson, sales director at Park Row Independent Mortgages. He adds that the options available for first-time buyers also cover new-build properties – with a few other avenues too.
“You might look at schemes where the builder pays the deposit, say, of up to 5 per cent. The market this year has been quite good for first-time buyers because of the price corrections in some property hotspots, and there are often extra incentives on new-build homes because the developer can’t sell them quite as fast at the moment.”
Shop around for the best deal on mortgages, advises Halifax spokesman Paul Fincham, including tracker, fixed-rate or interest-only. “You could consider shared ownership, and talk to a local authority or developer.”
“We do not discriminate either positively or negatively with regard to new-build,” confirms Emma Taynton-Young at Britannia Building Society, “although new properties can prove to need less maintenance and be more energy-efficient than older properties. Ultimately, provided that the property is suitable security for a mortgage, we are satisfied to lend.
Special offers
“Developers use many offers to help them shift properties on developments where demand is low, though their offers are targeted and they will not make offers where they do not need to,” adds Taynton-Young. “The main offers used are to discount the asking price, pay the deposit for the borrower, and taking an equity share. Britannia will lend in conjunction with any of these offers.”
Buy a Barratt home, for instance, and you could pay just 75 per cent of its allotted value with the developer’s Dream Start scheme. You take out a mortgage for just 75 per cent of the value, so your repayments are lower – and the remaining 25 per cent is an interest-free loan from Barratt. You repay it either in 10 years’ time or when you sell, whichever comes sooner.
Think twice
But look carefully at deals on newbuild, says Ray Boulger, senior technical adviser for mortgage broker Charcol. “Check that your lender will accept a builder’s deposit – some are not keen.” Some lenders take the view that this incentive is selling you a £200,000 property for £190,000, say – and your lender may put the true value at £190,000.
The same goes for buying
Furnished homes, such as show homes, says Boulger – a lender’s valuation may value the property as excluding furnishings. And be aware, he warns, that you may pay premium prices for a new-build which loses value when you move in, he warns, and the lender will want to ensure there is enough equity in the property. And if your dream home is unfinished, then remember that most lenders’ offers only last for six months.
Yet as developers surge ahead to address Britain’s housing shortfall, there are some great deals on newbuild – and some great mortgage choices to match.
Financing a new-build home
• Look at shared ownership schemes – developers like Barratt will share equity, so you buy at 75 per cent of the total cost and pay the rest within 10 years.
• Try the government’s shared home ownership scheme, currently available to ‘key workers’, among others. The scheme is under discussion as the government debates rolling out its HomeBuy initiative to a broader range of applicants.
• Look out for the government’s £60,000 houses, currently in the pipeline; 30 per cent of these are intended for key workers – mainstream lenders look likely to offer mortgages on these. There are also IKEA’s Boklok homes, aimed at people priced out of the open market and available from spring 2006. Talk to lenders and insurers first.
• Consider a guarantor mortgage – your parents share responsibility for the mortgage (though their own mortgage payments are taken into account too). Or try a FirstStart mortgage from Bank of Ireland.
• Interest-only mortgages are worth exploring if you believe your income will rise enough to allow a remortgage to a capital repayment mortgage in the near future.
