New Build Mortgages for Contractors
The path to arranging mortgages for new build properties conceals many hidden land mines. All new home buyers should be en garde, but especially independent contractors.
For a limited company director, getting even a simple mortgage can test their patience. But when hidden bogies emerge from behind sunlit clouds? It’s time to take evasive action.
New build dos, don’ts and other homebuyer options
Do prepare yourself for a huge deposit request alongside a mortgage offer. Not every mortgage adviser has access to the 10% deposit deals that we do.
Don’t get blindsided by property developers offering enticing incentives to sign up with them.
Most of all, don’t fall for developers’ use of strong-arm ‘in the moment’ tactics.
You have options to get yourself onto the property ladder, whatever they tell you on site. Let us be your wing man, spotting the hidden danger lurking just out of sight.
Buying a brand new home with 10% deposit
Until now, you could only get a low deposit mortgage using government sponsored schemes. A Help-to-Buy equity loan asks for 5% deposit, but comes with high interest rates. The alternative is a Shared Ownership mortgage, which isn’t everyone’s ideal route to homeownership.
But we’ve changed all that with this new deal. Our staff excel in giving contractors advice on new build mortgage loans.
Plus we now have a more competitive edge: we can get you access to new-build mortgages with just 10% deposit.
That’s an unprecedented level of entry to buying a brand new property. But even better, we’re super-thrilled to be able to offer this 90% LTV deal to our contractor clients.
The renaissance of the new-build mortgage
The thought of buying a home in which no one else has lived offers great appeal. So much so that new build property mortgages are in the midst of something of a renaissance.
The credit crunch and successive recessions saw demand decline. Lack of confidence and cash saw homebuilding in the UK almost grind to a halt.
The government kick-started interest with its Help-to-Buy and Shared Ownership schemes. Positive interventions like these drove the impetus the market needed.
Today, you can’t drive for more than a few miles outside a suburb without seeing a development under way. It’s a pity that lenders partnering those developers are harder to reach for contractors.
Hidden dangers contractors face buying a new property
As a contractor, the first thing you’ll notice about new builds is the higher deposit. This shouldn’t freak you out. Most mortgage lenders ask for higher deposits for development properties than for existing homes.Mortgage lenders assume that anyone buying a brand new home will pay a premium price Click To Tweet
The reason? Perception.
Mortgage lenders assume that anyone buying a brand new home will pay a premium price.
That’s seen the average deposits for new-build properties stabilise around:
- 15% for a new build home;
- 20% for new build flats and apartments.
This is what’s so exciting about our new deal for contractors on new build properties:
10% deposits for new build homes, even for limited company contractors!
Only a select few brokers have access to these interest rates right now.
So can you see the value of buying a brand spanking new home, but get fed up with High Street rejection? Then it’s time to change direction.
Other pitfalls to watch out for
If you’re of an age, you’ll have heard of the Ali ‘one–two’. It’s a blistering combination that gets through your guard, even if you’re prepared. The first punch is to soften you up, the second is the unexpected knockout blow.
Trying to buy a new build is akin to the old 1–2, based on many contractors’ related experience. The source of their chagrin isn’t just the developer or the mortgage lender. It’s both, as many developers have partnered with mortgage lenders to offer discounts.
Even then, new build developers and their chosen lenders aren’t always on the same page.
Lenders will, in the main, only allow a 5% discount on new build mortgages. If you see more than that on offer, especially if there are only a few plots left, be cautious. The reality is a stark contrast from the promise.#NewBuild developers and their chosen lenders aren't always on the same page Click To Tweet
Choose your right to independent advice
Strong arm tactics don’t end there. Developers may try and bully you on site and force you to use specific lenders and solicitors. Don’t give in!
Rules exist to protect your right to independent advice. It’s not compulsory to see a developer’s partners, which is great news for you.
That’s because we’ve covered the problems contractors face on the High Street in depth. In short? Without a contractor-friendly lender, you’ll struggle to get a mortgage using your contract rate.
The truth is, you’re a conundrum for most High Street banks and building societies. They can see your top line, but don’t get why your salary is so low.
Our tip? Don’t even try explaining low salary and dividend drawings to untrained mortgage advisers.
They’ll still mark your application ‘high risk’ when they send it to head office. This in turn predisposes their underwriters of a negative bias when viewing your income. And one failed application can leave an adverse trace for other lenders to see later on.Don't even try explaining low salary and dividend drawings to untrained mortgage advisers Click To Tweet
Leverage one asset to secure another
As a contractor, your best asset is your gross contractual income. We know that your accounts don’t reflect your true affordability. We also know how to package an application so that an underwriter sees it, too.
Buying a new build property should be an exhilarating new start for you and your family. Finding you the most competitive contractor mortgage for your circumstances is our house-warming present. Now that’s what you call a solid foundation.
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