Current data shows that one in four people aged 20-34 still
Luckily, the days of needing a 10% deposit and a generous loan from the bank of mum and dad are kind of behind us. Well, thanks to new build, we now have more options than just the traditional house buying model we’ve been used
New build properties aren’t
I’m currently in the process of buying a new build and it’s been a massive learning curve for me. It’s much more nuanced and complicated than I first expected and so I’ve done a lot of research and have a lot of advice to share.
What is a New Build?
A New Build home is exactly what it says on the tin — a property that’s new and has never been lived in. This can either be built from the ground up or in some cases, buildings like offices are refitted to become flats (this is what we’re buying).
They can be a really great option for anyone, but especially first-time buyers as the properties often come with your white goods, high spec and you no longer need to pay Stamp Duty on your first property (£300k or less).
How to buy a New Build
As I’ve mentioned, you no longer need to have a 10%+ deposit in order to buy a property. There are plenty of options for first-time buyers to finance their first home. Here are a few:
Help to Buy Equity Loan
Most New Build homes come with an option to buy with the help of the government’s Help to Buy Equity Loan, a scheme that loans first-time buyers 20% of their house price (40% if you’re in London), while you only need to put down a 5% deposit. This means that saving for your first deposit is essentially cut in half and your mortgage repayments are reduced as well as you only
Of course, by using the scheme, you do have two lenders for your property, but the Help to Buy Equity Loan only charges £1 a month from you for the first five years before interest needs to be paid. However, it’s worth noting that, regardless of how much you borrow, the government will take 20% of the property price when you sell it.
But, if you’re only looking to step onto the ladder rather than for a forever home, I personally think this is a great scheme, especially if you’re struggling to get your deposit together.
If you’re looking for a bigger place, but can’t afford the deposit, Shared Ownership or Share to Buy may be a great option for you. You can buy a share of a property (including New Builds) between 25% and 75% and pay rent on the remaining share, which is owned by a housing association.
This is a scheme for non-homeowners (it doesn’t have to be your first home, however) and you have the option to buy more of the property at a later date until you own 100% the property if you want.
Personally, I wasn’t comfortable with this option because the cost of a mortgage and rent (which is dead money IMO) wasn’t right for me. However, for many, this is the best way to buy the home they really want.
Help to Buy ISA
If you don’t want to borrow money from the Government or own just a fraction of your home, there is a third option which is a Help to Buy ISA. Offered by most mainstream banks, this scheme allows first-time buyers to earn up to £3,000 towards their home by saving a maximum of £200 every month into a specific ISA.
Unlike the Equity Loan, these ISAs are available to each first-time buyer, not each household which means that if you’re buying with your partner, you could potentially earn £6,000 towards your property.
Bear in mind, however, that this money isn’t available to be used for the deposit when you exchange contracts and you’re not allowed to use it to pay your estate agent or solicitors fees. Instead, it’s added to the money you’re already putting towards the property.
So, this isn’t a scheme designed to give you a boost towards the ladder, but rather, a generous reward for saving for your home. However, you can use this scheme with others, like the Help to Buy Equity Loan.
Pros of a New B
There are a lot of benefits to choosing to buy off-plan and taking a leap of faith towards a New Build.
For one, it’s brand new. No one else has lived there before and left their ugly wallpaper or outdated carpet. The spec is usually pretty neutral, so you’ll have a blank canvas to start with.
You’re also covered by a warranty. Although most buildings get 10 years, this doesn’t always include minor snagging or things like electrical problems or plumbing work. However, in most cases, you will be covered for the first two years for anything you’re unhappy with or breakages.
Lastly, some New Build properties come fully fitted with your white goods including
Cons of New Builds
Okay, so it all sounds great — right? However, just like with everything in life, there are some downsides to buying a New Build. While I haven’t moved in yet, there is something I’ve experienced that is pretty common — delays.
Luckily for us, we’re still living at home, so we’re not really affected by the vast amount of delays there has been. However, if you are in rented accommodation or in a buying chain, building delays can end up being costly. Our property was set to be done in April 2018, as I’m writing this it’s September 2018 and we’re still no closer to moving in.
Not only is it annoying that we’re not able to move in, but mortgage offers only last up to six months, so for many, they have to go through the application process again if a property is severely delayed.
Overall, I think that if you’re a first-time buyer with a limited budget, a New Build is a great option to get you on the property ladder. The initial costs are low and depending on where you live, the properties could be a worthwhile investment that’s easy to sell on.
However, it’s not for everyone and sometimes the security and legacy of an old home is more appealing to buyers. Whatever you choose, remember it’s your choice and you should do what’s right for you.