John Doughty is financial services director of the new build division at Just Mortgages
Mortgage brokers come in all shapes and sizes from advising on standard residential loans to a variety of specialisms.
Good examples of specialist advice are equity release, which requires an additional equity release mortgage qualification, and master brokers who concentrate on second charge lending. But another area where expertise is highly desirable is advising on mortgages for new build property.
Equity release partnership for Marsden Building Society
So what is the difference between new build mortgage advice and second hand property mortgage advice?
New build mortgage advisers require a specific knowledge bank around housing development and an understanding of different schemes. These include the government initiatives of Help to Buy Equity Loan and shared ownership.
Knowing the new build lenders
Not all lenders will lend on new build although more have come into the market in recent years.
Specialist advisers will know who they are, what their lending criteria is and have a good understanding of which lenders are likely to lend to someone or not.
They will know, for example, who will and won’t lend on flats or leasehold houses.
Knowing about Help to Buy
The government changed the rules for Help to Buy on 1 April 2021 and the scheme is now only available to first-time buyers; plus, regional price caps have been introduced.
New build advisers know how to apply for Help to Buy, who will lend on it and can explain to buyers how the scheme works.
For instance, it is important that borrowers understand the equity loan part and are aware of what happens at the end of the 5-year interest free loan.
Knowing about shared ownership
A growing part of the government’s affordable housing programme is shared ownership and our new build advisers work closely with housing associations.
The part own, part rent scheme can be a great way for people to get a foot on the property ladder but understanding the nuances of how it works is invaluable.
The knowledge of a specialist new build adviser here is vital as this is a niche area of the mortgage market and there are a limited number of lenders servicing it.
Knowing the property developers
A new build adviser often spends time on a property development site and will form a relationship with the developer so they are aware of what stage the site is at in the build.
Once a buyer has reserved their property, developers tend to want to exchange contracts within four weeks, even if the property is still being built.
It is important to know if a client’s home is not going to complete on time as this will impact on the mortgage.
Generally speaking, a six-month window is open between mortgage application and completion but if the build goes beyond this, the whole mortgage application has to start again and a new product found.
However, a new build adviser will know which lenders may extend the offer and if delays are anticipated they can choose a lender accordingly.
Knowing lenders’ exposure limits
New build advisers will also know about lenders’ exposure limits on new housing sites. As part of their risk assessment, lenders will have a ceiling on the number of properties they are willing to lend on one development.
For the larger lenders this could be as much as 20% to 30% of a site but would be much less for smaller lenders and would depend on an array of factors.
Knowing the warranty providers
All new build developments are subject to warranties. The biggest and most well-known provider is the National House Building Council (NHBC), which issues 10-year guarantees on around 80% of new builds.
But there are a number of other warranty providers and lenders have a list of which ones they will accept. Again, a specialist new build adviser would be aware of lenders’ requirements here.
Knowing about developers’ gifts
There is also the issue of developer gifts or contributions towards the deposit or fixtures and fittings and there are strict rules on this.
A new build adviser will know what is acceptable or not to lenders as such gifts could distort the true value of the property.
Developers must complete a ‘disclosure of incentives’ form, which shows the lender any discounts and incentives offered to the borrower.
New build advisers
By working on new build mortgage advice day in and day out, advisers can keep up with all the changes and developments within the sector. They are a fountain of knowledge for new home buyers.
The UK is crying out for more homes to be built so there will always be a demand for new build mortgages and advisers.
At Just Mortgages we are expanding our new build division and are setting up our first training academy to bring new brokers into the sector.
It is an exciting time to be specialising in new build with all its variety; and an added bonus is that we are helping people to find the right finance for their brand new home.