How New Build Mortgages Differ from Standard Mortgages
A new build mortgage isn't a separate product — it's a standard residential mortgage applied to a newly constructed property. However, lenders apply different rules because new builds carry specific risks:
| Factor | Standard (Existing Property) | New Build |
|---|---|---|
| Maximum LTV | Up to 95% | Typically 85–90% (some 95% via Deposit Unlock) |
| Deposit required | 5–10% | 10–15% (sometimes 5% with schemes) |
| Offer validity | 3–6 months | 3–6 months (critical for off-plan — extensions may be needed) |
| Valuation | Based on comparable sold prices | Based on comparable sales plus assessment of new build premium |
| Developer incentives | Not applicable | Must be declared; can reduce the effective valuation |
| Warranty requirement | Not always required | NHBC, Premier Guarantee, LABC, or equivalent required |
| Property must be complete? | Yes (existing) | No — can apply off-plan, but mortgage draws down at completion |
| Lender panel restrictions | Minimal | Developer must be on the lender's approved panel |
Why Lenders Are Stricter with New Builds
The core concern is the new build premium — the 10–20% markup that new properties command over comparable second-hand homes. Lenders know this premium can erode once the property is occupied, potentially leaving the borrower in negative equity. The stricter rules protect both the lender and the buyer.
Every Mortgage Type Explained
All standard mortgage types are available for new builds, though not all lenders offer every type for newly built properties.
Fixed Rate Mortgages
| Feature | Detail |
|---|---|
| How it works | Interest rate is locked for a set period (2, 3, 5, 7, or 10 years) |
| Monthly payments | Stay the same throughout the fixed period regardless of Bank of England base rate changes |
| After fixed period | Reverts to the lender's SVR (typically 7–8.5%) — you should remortgage before this happens |
| ERCs | Early repayment charges apply during the fixed period (typically 1–5% of the balance) |
| Best for | Buyers who want payment certainty and budget predictability |
| New build consideration | 2-year fixes are common but mean you'll remortgage when the new build premium may not have fully absorbed |
Recommendation for new build buyers: A 5-year fix gives your property time to appreciate past the new build premium before you need to remortgage. It also produces a lower stress test rate, increasing your borrowing capacity.
Tracker Mortgages
| Feature | Detail |
|---|---|
| How it works | Rate tracks the Bank of England base rate plus a set margin (e.g., base rate + 0.75%) |
| Monthly payments | Change when the base rate changes — can go up or down |
| After tracker period | Reverts to SVR (if term-limited) or continues tracking (if lifetime tracker) |
| ERCs | Some trackers have ERCs; others are ERC-free, allowing you to switch at any time |
| Best for | Buyers who believe rates will fall or stay stable, and can absorb payment increases |
| New build consideration | Higher stress test rates reduce affordability compared to longer fixed rates |
Discount Variable Rate Mortgages
| Feature | Detail |
|---|---|
| How it works | Rate is set at a discount below the lender's SVR (e.g., SVR minus 2%) |
| Monthly payments | Change when the lender changes their SVR — which they can do at any time |
| Key difference from tracker | The lender controls the SVR; it doesn't directly follow the base rate |
| Best for | Buyers comfortable with variable rates who want a discount without tracking the base rate |
| New build consideration | Less popular for new builds due to uncertainty and higher stress tests |
Offset Mortgages
| Feature | Detail |
|---|---|
| How it works | Your savings are "offset" against your mortgage balance, reducing the interest charged |
| Example | £250,000 mortgage with £30,000 savings = interest charged on £220,000 |
| Your savings | Remain accessible but don't earn interest (the "interest" is the mortgage interest saved) |
| Best for | Higher-rate taxpayers with significant savings; self-employed with variable cash flow |
| New build consideration | Fewer lenders offer offset for new builds; rates tend to be slightly higher than standard products |
Interest-Only Mortgages
| Feature | Detail |
|---|---|
| How it works | You only pay interest each month — the capital balance doesn't reduce |
| Monthly payments | Significantly lower than repayment mortgages |
| Repayment vehicle | You need a credible plan to repay the capital (investments, property sale, pension) |
| Typical LTV cap | 60–75% for interest-only |
| Best for | Buyers with high incomes, significant assets, or an investment strategy |
| New build consideration | The lower LTV cap combined with new build restrictions means you'll need a very large deposit |
Part-and-Part Mortgages
A hybrid where part of the loan is repayment and part is interest-only. For example, a £300,000 mortgage might be split £200,000 repayment and £100,000 interest-only. This reduces monthly payments while still building some equity. Available from most lenders subject to affordability and LTV requirements.
Mortgage Type Comparison Summary
| Type | Rate Certainty | Stress Test Impact | Flexibility | New Build Availability |
|---|---|---|---|---|
| 2-year fixed | High (2 years) | Highest stress rate | Low (ERCs) | Widely available |
| 5-year fixed | High (5 years) | Lowest stress rate | Low (ERCs) | Widely available |
| 10-year fixed | Very high (10 years) | Lowest stress rate | Very low (ERCs) | Limited availability |
| Tracker | None | High stress rate | Often ERC-free | Available |
| Discount variable | None | High stress rate | Varies | Limited for new builds |
| Offset | Depends on base | Standard | High (savings access) | Limited for new builds |
| Interest-only | Depends on rate type | Standard | Low LTV cap | Available, restricted |
Deposit Requirements by Property Type
Deposit requirements for new builds are generally higher than for existing properties. The exact amount depends on the property type, lender, and any schemes you're using.
| Property Type | Typical Minimum Deposit | Notes |
|---|---|---|
| New build house | 10% (some lenders accept 5%) | Widest lender availability at 10%+ |
| New build flat (1–3 storeys) | 10–15% | More lenders at 15% |
| New build flat (4–5 storeys) | 15–20% | Fewer lenders; some decline above 4 storeys |
| New build flat (6+ storeys / high-rise) | 20–25% | Very limited lenders; EWS1 form may be needed for cladding |
| New build with Deposit Unlock | 5% | Developer-funded insurance enables 95% LTV |
| Shared ownership | 5–10% of your purchased share | E.g., 5% of a 40% share on a £300,000 home = £6,000 |
| New build buy-to-let | 25% | Standard BTL deposit; some lenders require 30% for new builds |
Where Your Deposit Can Come From
| Source | Acceptable? | Evidence Required |
|---|---|---|
| Personal savings | Yes | Bank statements showing accumulation |
| Gift from family | Yes | Gifted deposit letter confirming no repayment expected |
| Lifetime ISA | Yes (property under £450,000) | LISA statements |
| Sale of existing property | Yes | Completion statement from sale |
| Inheritance | Yes | Probate documentation or solicitor letter |
| Developer contribution | Usually no (counted as incentive) | Deducted from property value for LTV |
| Personal loan | Generally no | Creates affordability complications |
| Crypto/investments | Sometimes | Detailed transaction history showing source; some lenders decline |
Loan-to-Value Restrictions for New Builds
LTV is the ratio of your mortgage to the property value. Higher LTV means a smaller deposit but higher risk for the lender.
LTV Bands and Rate Impact
| LTV Band | New Build Houses | New Build Flats | Rate Premium vs 60% LTV |
|---|---|---|---|
| Up to 60% | All lenders | All lenders | Baseline (best rates) |
| 60–75% | All lenders | Most lenders | +0.1–0.3% |
| 75–80% | Most lenders | Many lenders | +0.2–0.5% |
| 80–85% | Many lenders | Some lenders | +0.3–0.7% |
| 85–90% | Some lenders | Few lenders | +0.5–1.0% |
| 90–95% | Few (Deposit Unlock) | Very few | +0.8–1.5% |
The rate premium at higher LTV bands means that every 5% extra deposit you can raise doesn't just reduce the loan amount — it also reduces the interest rate, creating a double saving.
Government Schemes for New Build Buyers
Shared Ownership (England)
| Feature | Detail |
|---|---|
| How it works | Buy 25–75% of the home; pay rent on the housing association's share |
| Deposit | 5–10% of your purchased share |
| Income cap | £80,000 household income (£90,000 in London) |
| Staircasing | You can buy additional shares over time, up to 100% |
| Mortgage lenders | ~15–20 lenders offer shared ownership mortgages |
| New build specific | Most shared ownership is new build; some resale properties available |
| Rent on HA share | Typically 2.75% of the HA's share value per year |
First Homes (England)
| Feature | Detail |
|---|---|
| How it works | New build homes sold at 30–50% discount to market value |
| Eligibility | First-time buyers; household income under £80,000 (£90,000 in London) |
| Price cap | £250,000 after discount (£420,000 in London) |
| Discount | Locked to the property permanently — applies on future resales |
| Mortgage | Based on discounted price; standard lenders |
| Local connection | Local authorities may prioritise buyers with local connections or key workers |
Deposit Unlock
| Feature | Detail |
|---|---|
| How it works | The developer funds an insurance policy that allows lenders to offer 95% LTV on new builds |
| Deposit | 5% only |
| Eligibility | Must buy from a participating developer on an eligible development |
| Lenders | Specific lenders participate (not all) |
| Cost to buyer | None — the developer pays |
| New build specific | Exclusively for new builds |
Lifetime ISA (LISA)
| Feature | Detail |
|---|---|
| How it works | Save up to £4,000/year; government adds 25% bonus (up to £1,000/year) |
| Age requirement | Must open between 18 and 39; can contribute until 50 |
| Property price cap | £450,000 |
| Withdrawal penalty | 25% penalty on withdrawals not used for first home or retirement |
| Must be open 12+ months | The LISA must have been open for at least 12 months before using the bonus |
Forces Help to Buy
Available to UK armed forces personnel. Borrow up to 50% of salary (maximum £25,000) as an interest-free loan for 10 years. Can be used alongside any mortgage product. The loan repayment is counted as committed expenditure for affordability calculations.
Help to Buy Equity Loan (Closed)
This scheme closed to new applications in October 2022, with final completions by March 2023. Existing borrowers still hold equity loans that affect their remortgage options — see our remortgaging guide for details on repaying the equity loan.
Scotland, Wales, and Northern Ireland
| Nation | Key Scheme | Detail |
|---|---|---|
| Scotland | First Home Fund (Closed) | Shared equity scheme that provided up to £25,000. Now closed but existing loans remain |
| Scotland | LBTT relief for first-time buyers | No LBTT on first £175,000 for properties up to £175,000 |
| Wales | Shared Ownership — Wales | Similar to England but administered by Welsh housing associations |
| Wales | LTT relief for first-time buyers | No LTT on first £225,000 |
| Northern Ireland | Co-Ownership Housing | Shared ownership scheme administered by Co-Ownership NI |
Developer Incentives and How They Affect Your Mortgage
Developers frequently offer incentives to attract buyers. While appealing, these directly impact your mortgage application.
Common Developer Incentives
| Incentive | Typical Value | Lender Treatment |
|---|---|---|
| Stamp duty contribution | £0–£15,000+ | Generally acceptable up to 5% of purchase price |
| Deposit contribution / cashback | £5,000–£15,000 | Deducted from property value for LTV calculation |
| Flooring / carpet package | £2,000–£8,000 | Usually acceptable as adds value |
| Kitchen upgrades | £3,000–£10,000 | Usually acceptable as adds value |
| White goods package | £1,000–£3,000 | May be deducted if excessive |
| Legal fees paid | £1,000–£2,000 | Generally acceptable |
| Furniture package | £2,000–£10,000 | Often deducted from value (removable items) |
| Mortgage subsidy (reduced rate) | Varies | Must be declared; may affect product choice |
The 5% Rule
Most lenders accept total incentives up to 5% of the purchase price without adjusting the property valuation. Above 5%, the excess is deducted from the property value:
| Scenario | Purchase Price | Incentives | Effective Value for LTV |
|---|---|---|---|
| Within 5% limit | £300,000 | £12,000 (4%) | £300,000 |
| Over 5% limit | £300,000 | £24,000 (8%) | £291,000 (reduced by £9,000 excess) |
Important: You must declare all incentives to your mortgage lender and conveyancer. Failure to do so is mortgage fraud — a criminal offence.
Lender Panels and Developer Approval
Not every lender will lend on every new build development. Developers must be on a lender's "approved panel" for that lender to offer mortgages on their properties.
How Lender Panels Work
- Major developers (Barratt, Persimmon, Taylor Wimpey, Bellway, etc.) are on most lender panels
- Smaller regional developers may be on fewer panels
- If your chosen developer isn't on a lender's panel, that lender won't offer a mortgage on the property
- Your broker or the developer's sales team can confirm which lenders are available
What Lenders Check
| Check | Purpose |
|---|---|
| Developer financial stability | Ensures the developer can complete the build |
| Build quality history | Track record of completed developments |
| Warranty provider | Must have NHBC, Premier Guarantee, LABC, or equivalent |
| Development specifics | Build method, materials, location, planning compliance |
What If Your Developer Isn't on Many Panels?
A smaller panel limits your mortgage options, potentially meaning higher rates or stricter terms. Consider:
- Asking the developer which lenders they're approved with before reserving
- Using a broker who can quickly check panel availability
- Factoring this into your decision — a great house from a developer on few panels may cost more in mortgage terms
Mortgage Offer Validity and Extensions
Mortgage offers have expiry dates. For new builds, timing is critical because the property may not be complete when your offer is issued.
Typical Offer Validity Periods
| Lender Type | Standard Offer Validity | New Build Extension Available? |
|---|---|---|
| High street banks | 3–6 months | Some offer automatic 3-month extensions for new builds |
| Building societies | 3–6 months | Often more flexible with extensions |
| Specialist lenders | 6–9 months | Some specifically target off-plan with longer offers |
What Happens If Your Offer Expires
- Extension: Some lenders grant a 1–3 month extension without reassessment
- Reassessment: Others require a fresh credit check and affordability assessment
- Full reapplication: In some cases, you'll need to apply from scratch, potentially at a different rate
For detailed guidance on managing off-plan mortgage timing, see our dedicated off-plan mortgage timelines guide.
New Build Property Types and Lender Restrictions
| Property Type | Typical Max LTV | Key Restrictions |
|---|---|---|
| Detached house | 90–95% | Fewest restrictions; most lenders willing |
| Semi-detached / terraced house | 90–95% | Similar to detached |
| Flat (low-rise, 1–3 storeys) | 85–90% | Standard criteria; service charges assessed |
| Flat (medium-rise, 4–5 storeys) | 80–85% | Fewer lenders; some require specific construction details |
| Flat (high-rise, 6+ storeys) | 75–80% | Limited lenders; cladding/EWS1 may be required; some decline outright |
| Maisonette | 85–90% | Treated similarly to flats but with own entrance may improve terms |
| Bungalow | 90–95% | Treated similarly to houses |
| Townhouse | 90–95% | Generally treated as houses |
| Studio flat | 75–85% | Some lenders decline studios; minimum size requirements (28–30 sqm) |
| Live/work unit | 75–80% | Specialist lenders only; mixed-use complications |
Construction Methods
Modern new builds increasingly use non-traditional construction methods. Lender acceptance varies:
| Method | Lender Acceptance |
|---|---|
| Traditional brick and block | Universally accepted |
| Timber frame | Widely accepted with appropriate warranty |
| Steel frame | Most lenders accept |
| Modular / off-site manufacture | Increasing acceptance but some restrictions remain |
| Insulating concrete formwork (ICF) | Most lenders accept with warranty |
| Structural insulated panels (SIPs) | Accepted by many lenders with appropriate warranty |
| 3D printed homes | Very limited — specialist lenders only |
From Reservation to Completion: The Mortgage Timeline
| Stage | What Happens (Mortgage) | Typical Duration |
|---|---|---|
| 1. Reservation | Pay reservation fee (£500–£2,000). Not a mortgage stage but triggers the clock | Day 1 |
| 2. Agreement in Principle | Confirm with a lender that they'd lend you the amount needed (soft or hard credit check) | Within first week |
| 3. Formal application | Submit full application with income evidence, ID, and property details | Weeks 1–4 |
| 4. Valuation | Lender instructs a valuation — may be desk-based if property isn't complete | Weeks 2–6 |
| 5. Mortgage offer | Formal written offer issued. The clock starts on offer validity | Weeks 3–8 |
| 6. Exchange of contracts | Legally binding commitment. Deposit (usually 10%) paid to developer's solicitor | Weeks 4–12 |
| 7. Construction period | Property being built or finished. Your offer must remain valid through this period | Varies: 0–24+ months for off-plan |
| 8. Notice to complete | Developer gives 10–14 days' notice that the property is ready for completion | 14 days before completion |
| 9. Completion | Mortgage funds drawn down. You get the keys | Completion day |
Conveyancing for New Build Mortgages
The legal process for a new build purchase has additional steps compared to buying an existing property:
Key Conveyancing Differences
| Aspect | Existing Property | New Build |
|---|---|---|
| Contract | Standard Law Society contract | Developer's own contract (often heavily favourable to them) |
| Title | Usually straightforward | May involve new title registration, transfer from developer's land holding |
| Searches | Standard | May need additional searches; drainage/water may be incomplete |
| Tenure | Freehold or existing leasehold | New leasehold (flats), freehold (houses), or freehold with estate management |
| NHBC / warranty | May or may not exist | Must be in place before completion |
| Roads and sewers | Usually adopted | May be unadopted until local authority adopts them |
| Long-stop date | Not applicable | Contractual date by which the developer must complete or buyer can withdraw |
For the full conveyancing process, see our new build conveyancing guide.
Choosing a Solicitor
Your solicitor must be on your mortgage lender's approved panel. Some developers recommend solicitors — you can use them but aren't obligated to. An independent solicitor acting solely for you may scrutinise the developer's contract more critically.
Full Cost Breakdown: Beyond the Mortgage
| Cost | Typical Amount | When Paid |
|---|---|---|
| Deposit | 5–25% of property price | Exchange (10%) and/or completion |
| Reservation fee | £500–£2,000 | At reservation (usually deducted from deposit) |
| Stamp duty (England/NI) | £0–£15,000+ (FTBs: nil on first £300,000) | Within 14 days of completion |
| Solicitor/conveyancer | £1,000–£2,500 | At completion |
| Mortgage arrangement fee | £0–£1,999 | At application or added to loan |
| Mortgage broker fee | £0–£500 | At application or completion |
| Valuation fee | £0–£500 | At application (often free) |
| Buildings insurance | £200–£500/year | Required from exchange or completion |
| Moving costs | £500–£3,000 | Completion day |
| Service charge (flats) | £1,500–£5,000/year | Ongoing |
| Ground rent (pre-2022 leases) | £0–£500+/year | Ongoing |
| Estate management fee (some houses) | £100–£500/year | Ongoing |
Stamp Duty for New Builds (England and Northern Ireland, from April 2025)
| Price Band | Standard Rate | First-Time Buyer Rate |
|---|---|---|
| Up to £125,000 | 0% | 0% |
| £125,001–£250,000 | 2% | 0% (up to £300,000 for FTBs) |
| £250,001–£300,000 | 5% | 0% (FTB relief up to £300,000) |
| £300,001–£925,000 | 5% | 5% (FTB relief ends at £500,000 purchase price) |
| £925,001–£1,500,000 | 10% | 10% |
| Over £1,500,000 | 12% | 12% |
| Additional property surcharge | +5% | N/A (FTBs don't own existing property) |
For the full stamp duty breakdown including Scotland (LBTT) and Wales (LTT), see our stamp duty guide.
How to Choose the Right Lender
Key Factors for New Build Buyers
| Factor | Why It Matters |
|---|---|
| Developer panel approval | The lender must accept your specific developer and development |
| Maximum LTV for new builds | Some lenders cap new builds at 85% while others offer 90–95% |
| Offer validity period | Longer validity = less risk of expiry during construction |
| Extension policy | Flexible extension policies protect you from construction delays |
| Incentive policy | How generous is the lender with developer incentives? |
| Affordability model | Different models suit different income types — see our affordability guide |
| Service charge treatment | How the lender treats service charges affects borrowing capacity |
Broker vs Direct Application
For new build purchases, a whole-of-market broker is particularly valuable because:
- They know which lenders are on your developer's panel
- They can match your income type to the most favourable affordability model
- They can advise on the best product for off-plan timing
- They handle the complexity of developer incentive declarations
- Many developers have preferred broker partnerships with dedicated support
Frequently Asked Questions
Is it harder to get a mortgage on a new build?
Not necessarily harder, but different. You typically need a larger deposit (10% vs 5%), the lender must approve the developer, and your mortgage offer must remain valid until completion. With proper preparation, most buyers secure mortgages without issues.
Can I get a 95% mortgage on a new build?
Only through specific schemes like Deposit Unlock, where the developer funds insurance to enable 95% LTV. Without such schemes, most lenders cap new build mortgages at 85–90% LTV.
Do I need a specific type of mortgage for a new build?
No — all standard mortgage types (fixed, tracker, discount, offset) are available for new builds. However, lenders may apply different LTV limits and require the developer to be on their approved panel.
What happens if the new build isn't finished when my mortgage offer expires?
You'll need to request an extension from your lender, or reapply. Some lenders grant automatic extensions for new builds; others require a fresh application, potentially at a different rate. See our off-plan timing guide for detailed strategies.
Should I use the developer's recommended mortgage broker?
Developer-recommended brokers can be good — they know the development well and have streamlined processes. However, always check they're whole-of-market (not tied to specific lenders). You're never obligated to use them, and an independent broker may find a better deal.
Do developer incentives reduce how much I can borrow?
They can. Cashback incentives and deposit contributions are deducted from the property value for LTV purposes. Non-cash incentives (upgrades, stamp duty) are generally more mortgage-friendly. Keep total incentives under 5% of the purchase price to avoid valuation adjustments.