Angel Thomas
Principal Adviser, In2Equity Ltd
New-build properties come with incentives that can materially change whether the purchase works, but lenders treat them differently, and some incentives are worth more than others. Here is how to read the offer and what your lender will and will not count.
The incentives that matter
The big three are stamp duty paid, legal fees contributed, and a cash contribution toward your deposit or fixtures. Stamp duty paid on a £450,000 purchase is £12,750 to a first-time buyer above the relief line, that is real money. Legal fees of £1,500 are £1,500. A deposit contribution of 5% on £450,000 is £22,500.
What lenders will not accept
Most lenders cap the incentive they will count toward the purchase at 5% of the property value, and some exclude incentives from the deposit calculation entirely. If the developer is contributing to your deposit, several lenders want that on top of your own 5%, not instead of it. We know which is which.
The valuation trap
Developers sometimes price the property at the headline figure and then 'give' the incentives. Lenders value the property, not the price, and if the valuer marks it down, your LTV shifts and the deal can change. We order the valuation early and negotiate the price down if the valuation comes in light.
The leasehold warning
Many new-build flats are leasehold with ground rent and service charges that can be £2,000 to £4,000 a year. That comes off your affordability before the lender calculates the loan. A £400,000 flat with £3,000 of charges can borrow less than a £380,000 freehold house.
The snagging and timing risk
New builds complete late, and a delayed completion can break a chain if you are selling. We build the incentive review, the valuation and a realistic completion date into the offer so you are not caught.
What we do
We value the incentives in real pounds, match you to a lender that accepts the incentive structure, and check the valuation and leasehold costs before you commit. If the new build is genuinely cheaper than a comparable older property, we tell you, and if it is not, we tell you that too.