Dreaming of buying a new-build property, but feel like there are obstacles in your way? Felicity Barnett, lender operations manager at Mortgage Advice Bureau, debunks the top five myths associated with buying a new-build, so you can get mortgage-ready sooner than you think.
1) I need a perfect credit score to get a mortgage
Having a less-than-perfect credit score doesn’t automatically disqualify you from getting a mortgage. It does significantly improve your eligibility, and can give you access to a wider range of products and more competitive interest rates. Each lender’s assessment criteria will vary, and they’ll use different credit referencing agencies to assess your creditworthiness. For this reason, there isn’t a “magic number” for a credit score that guarantees a mortgage. However, generally speaking, the higher your credit score, the lower your level of financial risk in the eyes of the lender.
Make sure to check and cleanse your credit file before you speak to an adviser, as this will stand you in good stead when it comes to your mortgage application being submitted. It’s also important not to stress if you do have a low credit score. There are plenty of things you can do to improve this, from registering on the electoral roll, clearing any outstanding debts, and building on your credit if you have no history of making repayments.
2) I must have a minimum of 10% of the property’s value as a deposit
While a 10% deposit is often seen as an average benchmark, a higher deposit means you’ll have a lower loan-to-value ratio, and more competitive interest rates as a result. Nevertheless, there are options available if you have a smaller deposit available. Some new-build developers participate in schemes such as Deposit Unlock, Shared Ownership, and Own New, which allows you to purchase the property with a less than 10% deposit, or top it up through cash incentives.
You could also consider using a mortgage guarantor, who will use their own property/savings as security. However, it’s important to note that for this type of mortgage, both parties would be responsible for making the repayments.
3) My family must gift me a deposit if they want to help me get on the property ladder
It’s a common misconception that your family’s only option to support your homebuying journey is to contribute to your deposit in the form of gifted funds. In actual fact, there are various ways that family members can lend a hand and boost your borrowing power, as lenders acknowledge the fact that not everyone is in the financial position to gift a large sum of money.
This includes the option of a joint borrower sole proprietor mortgage, where more than one person is named on the mortgage, but only one of those people (or two if you’re a couple) is the legal owner of the property and responsible for the payments. However, everyone on the mortgage is legally responsible for the debt.
4) I’ll be stuck in a chain/unable to sell my current property, and will miss my completion deadline
With one of the most common fears among homemovers getting stuck in a chain, many builders are offering a solution to this problem by offering a part exchange deal. This is where they’ll buy your current home from you and sell it on themselves, so you’re not stuck looking for someone to buy your existing property before you move into your new-build. You won’t need to deal with estate agents or arrange viewings, simplifying the process even more.
To be eligible for part exchange, you’ll need to be a current homeowner looking to move to a new-build property. Most developers will have their own terms and conditions, so it’s worth doing your homework before pursuing this option.
“The Part Exchange service is a popular option for homebuyers, where the developer acts as a cash buyer for their existing property, allowing them to move into their new home chain-free and without estate agency fees,” adds Allan Walker, Director of Group Sales & Transformation, Cala Homes.
“With Part Exchange, the survey, marketing, and resale of your existing property is completely taken care of, so you can focus on enrolling the kids in their new school, arranging home furnishings, and booking removals. It also helps ensure that your move-in date aligns perfectly, so you can move directly from your old property to your new home without needing alternative accommodation or additional financial support. Try our Part Exchange calculator to see how this works.”
5) I can’t get a mortgage with only one year of self-employed accounts
While at least three years’ worth of self-employed accounts is the general consensus from lenders when conducting affordability checks, it’s absolutely possible to get a mortgage with only one year of self-employment history. Some lenders will take into account an array of factors as part of your application, such as a strong financial performance, evidence of secured future work, and a strong credit score.
During your appointment, your adviser will ask for the information provided to Inland Revenue (such as your SA302 (self-assessment) tax calculation and tax year overview) to determine your eligibility. It’s good practice to prep all relevant documentation ahead of time, as this can help streamline the application process.
The value of using a mortgage adviser
“Whether you’re buying for the first time or are looking to move home, a mortgage adviser can ensure you find the right deal for your needs. As well as navigating the varying complexities of the housing market, their in-depth, specialist knowledge and access to a range of exclusive products can help you get mortgage ready sooner. Speak to Mortgage Advice Bureau’s team of expert advisers today, and let us help you kickstart your new-build journey.”
If you’re a property investor looking for your next UK-based new-build opportunity, get in touch with BuyAssociation today and find out about our off-plan and completed options.
