Buying a New Build: The Ultimate Guide
First-time homebuyers aren’t the only people who need a little help understanding the process of purchasing new build homes.
Standards frequently change, as do the mandates that are associated with homeownership. And so this handy guide serves to walk upsizers, downsizers, and first-time buyers through the process of purchasing a new build house and all the things you should be considering along the way.
Let's jump into it!
What is a new build property?
Put simply, new build homes are newly built residences that have never been occupied. In other words, if the home has ever had someone living in it, that property is no longer classed as a new build.
Currently, we face a national property shortage. This crisis requires the necessity of building more homes. According to the government, over 300,000 new homes will be constructed annually throughout the mid-2020s. This is good news for those looking to buy a home.
According to Full Fact, between 2016 and 2017, there were only 184,000 residential dwellings built in England. The lack of new during that time is why there has been a property shortfall. The country has had challenges meeting the demands. Yet, the real estate market is the backbone of the economy in the United Kingdom.
So, buying a newly built home is easier today than in previous years. We believe that is due to the increased number of properties currently being built each year and those that will be built over the next five.
Pros and cons of buying a new build
As with most things in life, there could potentially be a handful of downsides to opting for a new build depending on your own specific circumstances and requirements.
It's also super important to make sure you're purchasing your new home from a reputable builder, with a demonstratable history of providing things like high-quality finishes and after-sales customer support.
That said, for the vast majority of people the pros considerably outweigh the cons. Here are some of the regularly cited benefits and also some possible downsides of purchasing a new build home:
Benefits of buying a new build
According to the FCA, the value of gross mortgage advances in Q4 of 2020 was £76.6 billion. That was 4.2% higher than Q4 of the previous year. That data indicates that property ownership and/or property prices are going up.
These alone are good reasons to not waste too much time before you buy, as the prices of homes are currently increasing faster than inflation.
However, there are many other reasons someone would look to purchase a new home. Here are the top benefits of buying a new build property:
- Everything is brand new: You'll be the first to live in the home, meaning everything is brand new when you move in.
- No Renovations: Repair, renovation and home improvement costs are minimal in the first couple of years.
- Customisation: The customisation process is a unique opportunity to choose features and customize your property's interior before it's built.
- Warranties: New homes usually come with 2-year builder warranties, which cover things breaking (such as doors & windows, switches, plugs, etc) as well as a 10-year NHBC warranty.
- Lower Energy Bills: As modern homes are built to stringent energy efficiency guidelines, you're likely to benefit from lower overall expenses and energy bills.
- Capital Gains: Quite often, if you buy your new home off-plan in the early stages of the development, it will already be worth more than you bought it for by the time you move in. Typically the last houses to be sold on a new housing development are sold at a considerably higher price than the same houses were sold for at the start.
Considerations when buying a new build
Whilst the benefits outweigh the downsides, there are some things to consider when it comes to purchasing a brand new property:
- Delays: Properties aren’t always finished on time. There can be several snags during construction and may cause your mortgage offer to expire before the developments are complete.
- Defects: As with anything new, defects so happen. According to an independent report by the New Homes Review, 87% of new-build homeowners report problems on their snagging survey. This is another reason it's important to buy from a reputable developer.
- Size: Older dwellings often have larger rooms and higher ceilings than the modern designs of new-builds. It's important to ensure the size of a new property is suitable for you & your family. To do this, make sure you visit the show homes, if possible, or 3d tours are usually available
- Disruptions/Noise: Unless you’re the last one to purchase a property in the housing development there will, unavoidably, be some disruptions and noise pollution during the construction of the rest of your new neighborhood.
The process & timeline of buying a new build
Let’s review the entire process and the timeline you can expect when purchasing a new build property:
1. Speak to a Mortgage Adviser and Get a Mortgage in Principle
When purchasing a new build property, the first step is to speak to a mortgage advisor with the aim of securing a mortgage in principle. It's generally recommended or that, as a buyer, you find a mortgage lender and get your finances in place before you start searching and viewing new homes.
A mortgage in principle lets the housebuilder know that you've been assessed by the bank(s), your finances are in order and that, ultimately, lets both you and them know that you can afford to buy the houses you're interested in potentially buying.
Whilst you might qualify to borrow a certain amount at this stage, it's also important to consider other things such as the potential running costs of a new home, which will all be added to your monthly mortgage payment.
So make sure you do your research and don't overstretch yourself financially.
2. Find Your Perfect New Build Home
For first-time buyers, this step in the process is usually the most fun. You have the opportunity to purchase the home that you want, in an area you love, with the amenities, features, and floor plan you desire. We recommend that you take your time one this step of the process.
The important thing is to try to remember to enjoy the search when you're looking for a new build home. A lot of people become frustrated when they don't find anything they like right away. But don’t rush - you’ll be living in this home for a while so it's important you find the perfect home for you.
If you have school-aged children, you'll need to consider the catchment areas of the surrounding schools. Also, your commute to work, transport links, and proximity to activities in which you participate should be something you bear in mind. In fact, the area where you live is probably the most vital consideration you will make.
Think of it this way - every house you view that you don't like, moves you one step closer to finding one that you do!
3. Reserve Your Property
Once you've found your new build home, the next step is to reserve the property. You can usually hold the property for up to 28 days with a reservation fee ranging from £500 to £2,000. It's during this reservation period that the developer will expect you to finalise and exchange contracts with them, which legally secures the house for you. Developers will apply and deduct your reservation fee from the final price.
4. Appoint a Conveyancing Solicitor
As touched on in the previous point, it's now time to appoint a conveyancing solicitor to work on exchanging contracts and providing legal support throughout the entire conveyancing process.
There are a lot of legal aspects to buying a new home that require a qualified expert to manage, regardless of the type of new build property you buy or the mortgage terms you have agreed upon. Part of the conveyancing process is ensuring that the contracts are fair and won't put you at a disadvantage.
The sales team for the developer will suggest that you use their solicitor as it usually helps to speed up the process and removes you as the middle-man. However, this is not a requirement, so feel free to choose your own if you prefer.
5. Secure Your Mortgage Application
In the first step of purchasing a new property, buyers go through a basic round assessment to agree a "mortgage in principle" with their chosen lender. Next, the purchaser must finalize the agreement and solidify the arrangements to secure the loan.
At this point, the mortgage lender will schedule for a valuation survey to be conducted by a surveyor. This valuation is based on the specifications the developer provided.
Your lender will also now perform much more stringent due diligence on you as the buyer, such as hard credit checks, confirmation of deposit, and proof of employment etc.
If all goes well, you will be given confirmation that your mortgage application has been successful and you qualify for a mortgage. This is usually valid for 3-6 months, so don't worry if your house isn't sue to be completed for a few months after this.
6. Pay Your Deposit
Up to now, you’ve spoken to the developer, the lender, and the solicitor. You've chosen your property and you've secured your mortgage! The only thing left to do now is to pay your deposit. The average deposit amount nationwide is approximately 15% of the property value, depending on factors such as price, repayments, and whether you’re a first-time buyer. Some programs offer as little as 5% down. However, income restrictions often apply.
Your deposit is usually paid to your solicitor and held by them in escrow as a trusted middle party. They will then be the ones who hand this over to the developers as soon as the sale goes through and you get your keys.
7. Exchange Contracts
We mentioned in step three that you'll have 28 days to exchange contracts. The conveyancing solicitor will check the terms of the agreement and draft the transfer and lease.
They will arrange the property title, prepare and finalize planning documents, and verify information with the solicitor. Keep in mind that this is when the developer, the solicitor, and the mortgage lender will require all necessary paperwork to be signed and submitted.
8. Wait to Move In
Waiting is always the most challenging part, especially for first-time owners! However, there's no specific timeline for every step of the process, and this step is no different. Once you have done your part of the buying process, you simply must wait. The transaction is out of your hands.
9. Conduct a Snagging Survey
A snagging survey entails walking around your new property and listing any issues you find with the home, such as the kitchen appliances, fixtures, fittings, electrics, and other defects. We recommend that you do this step between the contract exchange and the completion date.
Warranty repairs are another reason to complete a snagging survey. The builder is responsible for the repair of any defects in the properties when they build homes. You have two years from the time the developer renders services to report these to them - so if anything goes wrong within that timeframe you should be covered under your warranty.
Keep in mind, this does not cover any wear and tear caused to the properties by the owners. The warranty is appended to the property, which means that should you buy within the appropriate time frame – 10 years – you are entitled to make a claim against the guarantee.
Tips for buying off plan
First, let’s discuss what it means to buy an off-plan home. Simply stated, this is when you purchase a property that hasn’t been built yet. There is an increased risk with buying off-plan rather than buying an existing property. You are trusting the developer to deliver as promised upon completion and, in many cases, there won't be a show home available to view either.
We highly recommend that you get to know the market. You also need to research the developers to make sure they have a good track record of customer satisfaction. Do this regardless of whether you buy a residence already developed or one that you are having built. Remember that delays can happen, so you must work with the developers closely...
Think about the location of the plot
Location is key. Ensure that you do your homework when choosing the plot you'll have your new home built on.
For example, is it facing a busy main road? Is it at the end of a quiet cul-de-sac? Does it back on to a train track or public alleyway? Is your driveway at the side, front or back of your house, and which of those would you prefer? Is the back garden south-facing so you can catch plenty of sun in the Summer (if we get it!).
All of these things need to be considered when choosing your plot, so think very carefully about what's important to you and tick them off when choosing a plot.
Ask What’s Included with Your New Build Home
An advantage of selecting brand-new homes is that the customisations you choose are often part of the price. But what's actually included differs from developer to developer, so it's important you ask them about this.
Here are the most common inclusions or exclusions that you should ask them about
- Grass/turfing in the back garden
- Wooden fencing between your and your neighbours' back gardens
- White goods (washing machine, dishwasher, fridge/freezer, etc)
- Oven & cooking hobs
- Wooden flooring and carpets
- Fitted wardrobes
This way you can avoid any nasty surprises or hidden costs down the line that you didn't budget for.
View a Show Home to Get an Idea of the Specs and Finishes A show house is a great way to get an idea of what you're buying before signing on the dotted line. In some cases though, there won't be a show home of the particular type of property you're interested in purchasing.
If that's the case, we'd still recommend that you view the show homes and take notes to get a feel for the level of finish and the style of the fixtures and fittings you'll be getting in your new home.
Ask About the Expected Completion Date
The expected completion date is usually one of those things that's a deal-breaker for most people.
Depending on where the building company are in the construction cycle, the amount of time you might have to wait for the house to be built can be anywhere from 3-9 months in most cases.
For some people, waiting 6-9 months for their house t be completed isn't a problem, but for some people this just isn't an option.
Another thing to consider is that most mortgage approvals are valid for a maximum of 6 months... and so if you're new home take slonger than this to complete you may have to re-apply for a mortgage. Again, this isn't usually an option for most people but if your credit rating or financial circumstances have dramatically changed in that timeframe, there's no guarantee you'll be approved the 2nd time around.
Frequently asked questions
We understand that the information available on the different properties available, mortgage offers, and whom to partner with in this buying process often brings to mind even more questions than you had before. So, take a moment to review our answers to some of the most frequently asked questions about buying newly built homes.
Is purchasing a new build a good investment?
Whilst, naturally, the property market goes up and down, purchasing a newly built property is usually an excellent investment both in the short long term. Firstly, you likely won't have any cost for things like maintenance or home improvements for the first few years of ownership.
Secondly, your new build will be one of the newer houses in the area for years to come, and so will likely be able to maintain a good resale value when compared to older/less desirable properties in the area.
One of the other things to consider is that new homes are built to high modern standards of energy efficiency, which means lower gas and electricity bills for you.
Why are new homes more expensive?
While these homes may cost more initially, the investment when you first purchase typically does not need additional fees to be invested on top for repairs, improvements, upgrades or modernisations. A new home won’t need these things for several years. As long as the terms with the mortgage lender are favorable, you’ll have more interest on the loan paid before costly maintenance becomes a factor.
How long can you reserve a new build for?
Once you've reserved your house with the property developers, you have 28 days from the day you pay the reservation fee and sign paperwork to complete the sale.
How much is a reservation fee on a new build?
Reservation fees can vary depending on the properties you are looking at, the areas they're in, and whether you partner with a developer who understands the increasing cost of homeownership. These fees should be minimal. When you speak to the developer’s sales team, make sure that this fee – which is generally between £500 to £2,000 – is discounted from the final property price when the deal has been completed.
Buying a New Build: The Bottom Line
So, is buying a new build for you?
That's a question only you can answer, but hopefully this guide and walkthrough of the buying process has helped map out some of the things you should consider.
Ultimately, if you buy a new build you can afford, from one of the many reputable developers we're fortunate to have here in the UK, then the buying process should be an exciting and enjoyable experience.
Are you looking to buy a new build home? Check out all of our latest developments across Lancashire, Cheshire & Greater Manchester by clicking here.