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A Guide to The Mortgage Process for New Build Properties

28.11.17

The UK has long been one of the most desirable locations in the world to purchase property.

With easy access to the rest of Europe and its importance as a leading Financial Centre, opportunities to invest in UK property have always been welcome for many foreign nationals.

These days property is looking better than ever, with the UK seen increasingly as a safe haven away from the turmoil in Europe and the Middle East, plus an increasingly diverse and welcoming population eager for good quality accommodation.

With the supply of property still an issue in many parts of the capital, the New Build market has been encouraged with a series of Government initiatives leading to an explosion of new developments.

New Build has always had its attractions, with many buyers preferring to be the first ones to live in a property as well as the guarantees that come with a new property.

Given the prevailing low-interest rate environment in the UK at present, now is a particularly good time to obtain mortgage finance.

When purchasing a New Build, however, especially if you are looking to finance this with a mortgage, there are a series of things you need to be aware of before you part with your deposit.

As an award-winning, professional mortgage brokerage, Coreco is well versed in this type of transaction and we thought it would be useful to put together a brief, plain-speaking guide of the things to watch out for when looking at this type of funding.

 

01: Initial Steps

Once you view a property and express an interest, the first thing you will need to do is to make sure that you can afford the property and qualify for a mortgage. This is especially important whether you are a 1st Time Buyer looking to use one of the Government Schemes such as Help To Buy, or an overseas investor looking to make the most of the opportunities available.

 

02: Choose who to work with

Speaking to a Professional Mortgage Broker who is experienced in the New Build arena is the best way forward, as they will have a knowledge of not only how schemes such as Help To Buy work, but also how every lender works and which ones have the best products at any one time.

Going directly to a bank is fine, but they can only offer their own products which may not be the most suitable for you or be able to move within the required timeframe.

At Coreco, we have access to over 11,000 products from over 90 different lenders, including broker only Exclusives, High Street products and Buy To Let portfolio loans. We are also well versed in dealing with Private Banks and offshore arrangements for more complex investors.

We will ensure you are in the best position to proceed quickly and be at your side throughout the whole process to smooth out any unforeseen bumps in the road.

 

03: Buy To Let Investors

Buy To Let investors also need to take care given the recent changes to both the tax regime, regulation and the way mortgage lenders assess an application. There are a few more hoops to jump through these days and it is important to choose the best lender and product that will suit your long-term investment aims.

 

04: Get your documentation in order

Preparing for a mortgage starts early so make sure your documentation is in order. A broker will need the following documentation in order to make sure the lender has the right information. Getting this early will speed up the process no end:-

 

  • Proof of identity – Passport or Driving Licence
  • Proof of address – utility bill dated within the last 3 years
  • Last 3 months payslips and last 2 P60’s
  • If self-employed last 3 years accounts or SA302’s
  • Last 3 months bank statements
  • Proof of the deposit monies
  • Details of any loans or credit card debts

 

05: Secure an Agreement in Principle

With these details the broker will be able to obtain an Agreement in Principle from suitable lenders, carefully explaining the costs, fees and benefits of the different products and advising you on which is most suitable.

This will confirm in writing how much a lender will be prepared to lend you, subject to a full mortgage application and underwriting. This AIP can then be used to confirm your creditworthiness to the vendor and that you are a serious buyer.

 

06: Government Help To Buy Schemes

If the Help To Buy Scheme is being used you will need to get proof of your affordability and approval from your local Help To Buy agent.

Your broker will be able to help you through this. They will submit an application and affordability calculator on your behalf and authority to proceed will usually be issued within 7 days.

Once you have this and an ‘Agreement in Principle’ from the lender you will be ok to proceed with the purchase.

 

07: Assignable Contracts

In some instances, especially if you are purchasing an Assignable Contract, you may need to use a specialist lender or a Bridging Loan initially. Many mainstream lenders will not be able to lend on this basis and this is where a professional broker with experience is worth their weight in gold and can literally save you hundreds or thousands of pounds with the right advice.

 

08: Overseas Investors and Visa Requirements

For foreign nationals from outside of the EU looking for a mortgage, some high street lenders will insist on a visa or work permit and sufficient permission to live in the UK.

Indefinite Leave to Remain, (ILR) is often a requirement of many of the major lenders, however, some lenders will accept those on Tier 1 or 2 Visas with a track record in the UK.

Other lenders do not have such onerous requirements and can offer terms to those on, say a 3 or 5-year working visa with little time left.

There are also a number of international lenders who will not have such issues.

If you are an overseas investor who will not be moving to the UK then there are also a wide range of options available to you dependent on your status in your country of residence. We have access to many Specialist Lenders and Private Banks who will be able to lend to you and will follow a similar path of due diligence as if you were a UK resident.

 

09: Private Banks & Large Loans

For those with more complex requirements or wishing to borrow at £500,000 and beyond, a Private Banking relationship may be better value.

This can be arranged either onshore in the UK or through a bank’s offshore lending arm and we would recommend that each client take independent tax advice to ensure the correct structure is put into place. Some may wish to buy the property in a Corporate entity rather than in personal names and this can be arranged without too many issues.

At this level, lenders operate on a “blank sheet of paper” approach, offering bespoke products for the right type of customer which are often better than those that can be obtained on the high street.

Overseas income and assets can be taken into account when deciding on the level of borrowing acceptable and flexibility can be built in.

 

10: Bringing Money Into The UK

For some foreign buyers, bringing cash into the UK may be problematic for various reasons.

Private Banking institutions can not only provide the mortgage offshore but may also be able to lend against offshore assets, such as cash or shares held elsewhere. This process, known as “back-to-back” lending could enable wealthy buyers to effectively borrow 100% of the value of the property.

For others who are bringing cash into the UK, denominated in another currency, we have partnered with Mercury FX, a specialist foreign exchange provider to ensure the best exchange rates are obtained.

 

11: The Mortgage Process

 

  • Once you are happy with the mortgage terms and costs, have an Agreement in Principle and agreed the property purchase, a full mortgage application will be submitted and your broker will then inform you of any other supporting information the lender may request.
  • The valuation is usually instructed by the lender upon receipt of the application and any supporting information.
  • Once the lender has confirmed that your documents are all in order and the valuation is received back ok the lender will issue the mortgage offer.
  • In many cases, the offer will come through before the property is actually completed. In this case, the lender will require a re-inspection valuation to take place once the property is ready before they will sign off the loan.
  • It is also important to pay attention to how long the mortgage offer is valid for if you are buying “Off Plan”. Many lenders Mortgage Offers expire after a certain time period of 3 months, 90 days or 6 months. Those lenders with specialist New Build Divisions are able to extend the offers by another 6 months or have 9 or 12-month expiry periods.
  • The mortgage offer is sent to you and your solicitor, who will go through the conditions of the offer and prepare a Certificate of Title.
  • Once this has all been done and both parties are happy, exchange of contracts takes place. At this point, a completion date is set and the monies requested from the lender.
  • On completion, the mortgage monies are passed to your solicitor and then builder