Buying a New-Build Home: What do You Need to Consider?
New houses and flats are popping up nationwide, with many snapped up before building has even been completed. What do you need to consider when buying one?
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New-build properties are highly appealing to people wanting a blank canvas and to first-time buyers looking to secure their first time mortgage, but it’s important to be aware of the unique set of potential challenges that may occur when purchasing directly from a developer.
Read on for your guide to new build properties and the things to think about when buying a new build home.
What is a new-build property?
A new-build property is brand-new and has had no previous inhabitants. The Government have emphasised the importance of new-builds in addressing and tackling the national property shortage, which is why they have committed to the construction of 300,000 new-build homes per annum by the mid-’20s.
New-build properties come with fixtures and fittings that you might otherwise have to dig deep for if you were to purchase them separately. Developers may attempt to upsell you additional assets, but be aware that the prices of these could have been inflated.
A plethora of regulations mean that today’s developers must meet certain standards of energy efficiency with new-builds. This means features such as double- (or even triple-) -glazed windows, energy-efficient heating and insulated doors, walls and roofs.
What is the process of buying a new-build property?
If you’re looking to purchase a new-build, you should consider the following steps to ensure the buying process is watertight and comprehensive.
1. Get your finances in order
It’s well worth consulting a mortgage adviser to calculate how much you could borrow for your new-build purchase. That way you’ll know precisely what you can afford before entering into dialogues with developers.
Before house hunting, it’s also a good idea to secure a mortgage in principle, which confirms that a lender will, in principle, provide you with a mortgage of a certain amount. You can leverage this document to demonstrate to developers your capacity to buy.
Read our guide on how to save for a mortgage deposit for more information.
2. Find a property
Research the area that you’re looking to move into, as well as the developer’s track record for delivering high-quality properties in a timely fashion. Once you are clear on your price range, you can begin visiting new-build developments. You will be taken around show homes, or a marketing suite if the building has not yet completed on a show home.
3. Make an offer—then pay a fee
Once you’ve found the home of your dreams and you’re confident you’ll be able to afford the monthly mortgage repayments, you’ll be in a strong position to put in an offer. This need not necessarily be for the asking price, either; negotiations are commonplace.
If your offer is accepted, you’ll be required to pay a reservation fee to ensure the property remains under your name. This will probably be in the range of £500–£1,000, and it’s usually deducted from your purchase price. However, be aware that the reservation fee is non-refundable if you change your mind and wish to pull out.
4. Address your legal and financial obligations
You’ll probably need to appoint a solicitor or conveyancer to handle the legal facets of your purchase. Some All of these individuals specialise in new-builds. They’ll be able to check that the estate has access to all the required services, such as sewers and roads, and that the developer has the proper planning permission in place.
They will manage the exchange of funds for your property purchase and negotiate your completion date. They will also be able to negotiate when you can pick up your keys, as well as manage the funds you’re using to buy the property.
5. Prepare to move in!
Months before your move-in date, contracts are exchanged and t the deposit is paid via your conveyancer. You may encounter a little jargon during this period, but just remember:
- short-stop date: the date when the developer expects work to complete
- long-stop date: the date by which work must have been completed
The long-stop date is designed to protect you from losing your mortgage offer, as they generally expire after six months. New Homes Review found that just under 40 % of new-builds aren’t ready by their originally projected deadlines. This is why having a conveyancer is so important, as they will keep both you and the mortgage provider up-to-date with the process.
Finally, make sure to have a so-called snagging survey conducted before moving in. This is where unresolved issues with the property can be identified and fixed as quickly as possible.
What are the benefits of new-build properties?
New-build properties can make fantastic homes, resplendent as they are in brand-new fixtures and fittings and often situated in desirable areas. The advantages of moving into a new-build property are manyfold, so let’s explore them.
New-builds must comply with the latest regulations on energy efficiency, which means lower energy bills than in older properties. Modern construction techniques prevent damp, and double glazing, draft proofing and insulation of the loft and wall cavities prevents heat from escaping. Central heating systems are built to be reliable and efficient, meaning new-builds are relatively fast and inexpensive to heat.
Lower repair costs
Modern building regulations mean new-builds often come with structural warranties of at least 10 years. When you move in, everything is new and in working order, so you may not need to budget as much for repairs or renovation.
The snagging survey also ensures no minor defects slip through the net and are fully addressed by the developer before your move-in date.
Lower maintenance costs
As your new-build home ages, maintenance could be less expensive than it would have been had you moved into a property that already had a good number of years under its belt. New-builds are constructed with the latest materials, such as UPVC double glazing, soffit boards and fascias, meaning it should be a long time before any major maintenance work is required.
New-builds make especially safe homes because they are generally fitted with window and door locks of the highest standard. Many housebuilders additionally provide alarms as standard, or at least lay down the wiring for them.
These security features can dramatically reduce your insurance premiums, as well as afford you and your loved ones a genuine sense of safety.
Higher specification, greater choice
Most new-builds come with fitted kitchens with fixtures preinstalled. For white goods, the developer will probably offer you a range of options at competitive rates. What’s more, many new-builds have fitted or built-in wardrobes in the principal bedrooms.
You may be allowed to choose the colours of floor coverings and kitchen units and the design of wall tiles.
The latest construction standards require the use of fire-resistant materials and linked smoke alarms. Some windows will be designed to open sufficiently to enable escape in the event of a fire, and wiring will be protected by circuit breakers.
Opportunity for negotiations
Housebuilders are keen to sell their new homes, so are often willing to enter into price negotiations. They may even throw in the odd incentive to secure a sale, such as paying your stamp duty or legal fees or including white goods in the purchase.
New-builds are amongst the greenest properties in the UK. Features such as dual-flush cisterns and fitted showers minimise domestic water use, and heating and insulation efficiencies mean your new home will leave as small a carbon footprint as possible.
No onward chain
As the first owner of this property, you have the luxury of not sitting in a an onward chain of buyers and sellers, an oftentimes volatile and stressful position to be in. If you are a first time buyer this can cut out a huge amount of time from the buying process.
What are the downsides of new-build properties?
New-builds make wonderful homes but, as with any major financial commitment, there are a number of pitfalls that you may experience down the line.
Ground rent and service charges
Most flats are leasehold, not freehold, and if your new-build flat has been sold to you on a leasehold basis then you won’t own the land on which it sits and will therefore need to pay an annual ground rent to the freeholder. You may also be required to pay service charges for the maintenance of communal areas of the block or estate.
Possibility of snags
New-builds may have so-called snags, minor defects such as ill-fitting doors or loose tiles, which need addressing before a comprehensive and successful move-in. However, the above-mentioned snagging survey should serve to identify snags and get them fixed by the developer before your arrival.
Some providers do not lend to prospective homebuyers who are looking at new-builds, and those that do may be stricter than they would if you were looking to move into another type of property. It’s therefore important to shop around for a good deal, and perhaps consult with a broker.
Delays in completion
The timelines of construction projects are notoriously unpredictable, and it’s not uncommon for a move-in date on a new-build to be delayed. This can be stressful and potentially add to your expenses if you need to rent somewhere in the meantime or store your possessions.
Additional expenses down the line
Even if your new-build home is freehold, covenants may have been written into its title deeds that obligate you as the owner to pay for certain items or even ban particular activities. For example, if the estate has not been adopted by the council, residents may have to pay for the upkeep of the road and grass verges.
Covenants could also prohibit you from parking a van or caravan on your drive or from owning a pet. You may also need paid-for permission from the developer if you wish to alter or extend your home.
What schemes are available to help me buy a new-build property?
Participating in the Government’s Help to Buy: Equity Loan scheme can see you lent up to 20% of the cost of your new-build home, meaning you’d need a deposit of only 5% to secure the property, provided you can find a lender to loan you a mortgage of 75% to make up the rest.
The Government does not charge interest on these loans for the first five years of home ownership. Be aware that Help to Buy is currently unavailable in Northern Ireland.
Saving for a deposit is a multifaceted process, although you may find that you are actually eligible for a mortgage even if you have no deposit. You can use NerdWallet’s mortgage calculator to work out how much you can likely expect a provider to loan you. Read our guide on the essential things you need to know about when choosing a mortgage for more information.
Some house builders run part-exchange schemes, which enable buyers to purchase new-builds by leveraging their current properties as partial payment. These schemes negate the hassle of traditional selling, but be aware that some developers will offer below the market value. It’s therefore advisable to have an estate agent conduct their own objective valuations before you sign on the dotted line.
A blank canvas…
Moving into a new-build is a fantastic experience. Your home will be truly yours to do with as you wish. You may design it however you want, and you’re free of any other party’s subjective tastes in decoration and questionable capacities for DIY. No-one has ever lived here before; it’s history in the making!
John Ellmore is a director of NerdWallet UK and is a company spokesperson for consumer finance issues. John is committed to providing clear, accurate and transparent financial information. Read more