Buying a new build-home has become a lot easier since the Government launched a variety of schemes designed to support house builders and give buyers a leg-up the housing ladder.
Help to Buy (equity loan)
Help to Buy comes in two parts – the first of which (equity loan) was announced back in April 2013.
Under the scheme, the Government will provide a loan of up to 20% of the property value – while you will only be required to produce a deposit of 5%. The remaining 75% will need to be covered by a mortgage from a lender that participates in the scheme.
The Government loan is interest-free for the first five years, after which you will be charged 1.75% on the original loan’s value as interest. The loan must be repaid after 25 years or when you sell your home – whichever happens first.
Help to Buy can be accessed through participating builders and is only available on homes up to a value of £600,000.
Interested in the Help to Buy equity loan? Start by contacting a Help to Buy agent
If you want to buy in the capital, Help to Buy London is useful extension of the Help to Buy equity loan. Announced in February 2016, this scheme doubles the Government’s equity loan contribution to 40% of the property value. It’s designed to support the high house prices that London commands.
The rest of Help to Buy London works the same as the standard Help to Buy equity loan scheme. You can find out more about Help to buy London with our handy Q&A.
Interested in London Help to Buy? Start by finding out what homes are available in the relevant postcode area
Help to Buy (mortgage guarantee)
Help to Buy mortgage guarantee, which was announced in January 2014, can also be used to buy a new-build home – although this part of Help to Buy extends to re-sale properties too.
Again, buyers must raise a deposit of at least 5% of the property’s purchase price. But the Government then offers the mortgage lender a guarantee of a further 15%. This form of insurance frees up the bank or building society to offer its loan at cheaper rates than it would otherwise against such a small deposit (although you should always compare standard mortgage deals for a 5% deposit).
Like the equity loan branch of Help to Buy, mortgage guarantee is available on properties up to a maximum value of £600,000.
You need to get organised if you want to use this part of the scheme though as it comes to an end on 31 December 2016. And this date refers to completion, not the deadline for an application.
Interested in Help to Buy mortgage guarantee? Start by contact a participating Help to Buy lender. You’ll find a full list on the government website
Note! Bear in mind you won’t be able to use any part of Help to Buy in combination with any other government scheme such as Right to Buy or Shared Ownership. Help to Buy is also only valid if you are buying your first or only home. You won’t be able to sublet it or rent the property out either.
Which new-build Gov scheme would you use?— Zoopla (@Zoopla) May 5, 2016
Announced in March 2015, the Starter Homes scheme is a more recent government initiative designed to help you buy an affordable new-build home.
Under the Starter Homes banner, the Government aims to support the building of 200,000 new homes which will then be offered at a 20% discount to first-time buyers under the age of 40.
Government proposals recently revealed that 1 in 5 new homes on sites of 10 or more properties should be Starter Homes.
The Starter Homes scheme is still in consultation phase until 18 May 2016 so we don’t have all the details yet. However, you can read the plans and even offer your thoughts here.
Interested in the Starter Home scheme? Start by registering your interest at the government website
Shared Ownership schemes are typically available on new homes – although, because some properties are re-sold by housing associations, they may not be brand new.
Shared Ownership is available to first-time buyers or anyone who has formerly owned a home but can’t afford one now. Your household income cannot be more than a collective £80,000 (or £90,000 in London).
Qualifying buyers are able to purchase just a stake of a new-build home from a housing association (between 25% and 75%) with a typical 10% deposit on the relevant share. The fact you are not buying 100% of the home helps ease affordability – ie, when your earnings aren’t big enough to borrow what you need from a mortgage lender.
You’ll have to pay rent to the housing association on the proportion of the property you don’t own, though this is designed to be ‘affordable’.
It is also possible to buy more shares of the property at a later date – known as staircasing – so eventually you could own the entire home.
Interested in Shared Ownership? Start by searching for properties on the Government’s Share to Buy website
Government saving schemes for buying a new-build home
First-time buyers racing against rising house prices to save a deposit might look at Help to Buy ISA. Launched in December 2015, this special account comes with a £50 tax-free bonus from the Government for every £200 you can save each month. If your balance reaches £12,000, the Government bonus will be £3,000 – the maximum allowed.
You can use the funds to put towards the costs of buying a new-build home (or an existing one) so long as the purchase price isn't more than £250,000, or £450,000 in London. But bear in mind it's since transpired to won't be able to use the money for the deposit, as we explain here.
Interested in a Help to Buy ISA? Find out more with our Help to Buy pros and cons
The Government’s new Lifetime ISA, announced in March 2016 and available from April 2017, could also help boost your bank balance if you’re saving towards a new-build home.
If you’re aged between 18 and 40 you can save up to £4,000 a year into the account and receive a tax-free Government bonus of up to £1,000 a year.
You can then choose to put some or all of the money towards your first home, so long as its purchase price is £450,000 or less.
Interested in a Lifetime ISA? Find out more with our article
What about incentives from developers?
Many house builders and developers also offer their own incentives. Some examples might be:
Your Stamp Duty paid (calculate what this could cost here)
Your deposit paid (up to a certain limit, say 5%)
Free fixtures and fittings, white goods, interior design advice or landscaping for your garden
Cashback on completion
Part-exchange deals (where the house builder or developer purchases your existing home from you and sells it on)
Assisted sale, where the house builder or developer helps to sell your existing property. It will typically arrange for an independent valuation and market your home through its own sales department and an estate agent.
Top tip! Find out when your house builder or developer’s financial year ends. If it’s behind on targets it could be a great time to negotiate a lower sales price or bag yourself some incentives.