Buying a new build home: Is it worth it?
If you are struggling to get on the property ladder, then a new build home may seem like the answer. More and more homes are being built across the country to tackle the housing crisis, and government schemes such as Help to Buy and Shared Ownership are making new builds more attainable for first time buyers. Buying a new build therefore seems like a sensible solution for many people; however, that’s not to say there aren’t drawbacks to buying a brand new property. Here we take a look at whether it’s really worth buying a new build home.
There are certain advantages to buying a new build home, many of which could save you money.
New – It comes with the territory: everything in the house is new and therefore is often at a higher spec than in some older properties. There is also the bonus that because the house is new, it will require less maintenance.
Energy efficient – New builds have to adhere to current building regulations and are more energy efficient than most older properties. Your utility bills are likely to be lower as a result.
Warranty – All new builds are covered under some sort of warranty. There are three providers – NHBC, LABC and Premier Guarantee – but NHBC covers around 80% of the new build market. A warranty is split into two periods – the defects period, which covers the first two years, and the structural insurance period, which covers years three to 10.
Upward chain free – Buying and selling a house can be a stressful time, especially if you end up in a large chain. One big advantage to a new build home is that there is no upward chain, and in some cases, developers will allow you to part-exchange your existing property.
Help to Buy – A significant reason why new build properties may be more affordable is because they are included in government schemes such as Help to Buy and Shared Ownership. With the Help to Buy scheme, the Government will lend you 20% of the cost of your newly built home; you’ll only need a 5% deposit and 75% mortgage to make up the rest. You then won’t be charged loan fees for the first five years of owning your home. With the Shared Ownership scheme, you can buy between 25% and 75% of the home’s value and pay rent on the remaining share.
Personalisation – If you are buying ‘off plan’ (i.e. before the property is built) you may get a say in the style of the fixtures and fittings.
It’s easy to get distracted by something shiny and new, but there are a few downsides.
Mortgage issues – You may find it harder to get a mortgage for a new build property or find that you’re charged a higher interest rate. This is because lenders view these mortgages as riskier because of the possibility the value of the property may fall in the first few years of ownership due to the ‘new build premium’ (see below). You may also find that your mortgage offer (which lasts six months) expires before your property is ready to move into.
New build premium – Yes everything will be new, and you are paying the price for that. The headline price on new build homes factors in that fittings and fixtures are brand new. But as soon as you move in and start using them, they are no longer new and are therefore of less value. Which means that in a year’s time your property – discounting market movements – could be worth less.
Snagging issues – You may encounter teething problems with a new build, because of just that – it’s new. According to a survey conducted by New Homes Review, 87% of new build homeowners reported issues with their properties. Even with the cover provided under a new build warranty, any problems requiring attention could still be seen as an inconvenience.
Delays – You may have paid your (non-refundable) reservation fee, exchanged contracts and be ready to go, but your home may not be ready for you just yet. Delays can happen and deadlines can be missed. This particularly causes an issue if you are in a chain or if your mortgage offer is about to expire.
Is it worth it?
As with anything, it is a personal decision. New build homes do have some distinct advantages in that everything is new, you will not have an upward chain, and they come under the Help to Buy scheme. However, new is not always better. Be careful of overpaying for a property, and be prepared for delays. Also, there may be some teething problems in the first few years, but remember the cover provided under the 10-year new build warranty.
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