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Housing Watch: New homes can be complex

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Jonathan-Stinton-2022Energy efficient, often located in areas most in need of housing stock, and offering buyers a convenient, no-chain purchase option, new-build homes are increasingly popular, particularly with younger buyers at the start of their homeowning journey.

In fact, one in six property purchases in 2022 was for a new-build home, according to UK Finance figures for January to November.

Incentives can play an important role in affordability

For brokers, however, advising on new-builds presents its own challenges and extra complexities.

Being aware of the nuances of this sector and building strong knowledge are therefore vital.

Flexibility

One of the biggest challenges is managing construction delays and their impact on the timeline to completion. Brokers must manage clients’ expectations from the outset, while also looking for lenders with flexible extension processes and periods.

Some new-build lenders have a 12-month offer period. However, this may require brokers to apply for an extension after the first six or nine months to ensure their client receives the full flexibility of the total offer period.

The possibility of delays and additional challenges means it’s critical to find a lender with a record of delivering consistently high levels of service

At Coventry for Intermediaries we have a nine-month offer period and we allow brokers to apply for an extension of three months up to 30 days before the original offer expires, without the need for conveyancer input or even a customer signature.

When considering which lender to choose, it’s also important to think about what stage of construction the property is in. A property in the early stages of building could be more likely to face delays than could one close to completion.

Understanding incentives

There is a huge range of both financial and non-financial incentives surrounding many new-build deals. These extend from cashback schemes to kitchen upgrades and free fitted appliances.

Whether it’s the attraction of energy efficiency for landlords, or a first-time buyer’s dream of owning a home, demand for new-builds is growing

For first-time buyers, whose finances are often under the most strain, such incentives can play an important role in the affordability of the property.

However, different levels and types of incentive will be accepted by different lenders.

A first step should be to discuss and understand what the client has agreed to, and from there make the most of sourcing systems and lender relationships to identify which mortgage providers are willing to lend against these specific circumstances.

Service, service, service

The possibility of delays in completion timelines and additional challenges around new-build cases mean it’s critical to find a lender with a proven record of delivering consistently high levels of service.

Manage clients’ expectations from the outset

As well as using sourcing systems, brokers may be required to contact lenders directly in some cases. The good news is that a number of lenders have dedicated new-build support teams, to provide expert guidance and offer a prompt response to questions from brokers.

Finally, as with any application, it’s also important that brokers take full account of their clients’ individual circumstances, such as their financial stability and long-term goals. By having a broad understanding of clients’ plans, brokers are well placed to find a suitable lender and deliver the best outcomes.

Whether it’s the attraction of energy efficiency for landlords, or a first-time buyer’s dream of owning a home, demand for new-builds is growing.

It’s important to think about what stage of construction the property is in

For brokers, there has never been a more important time to build a strong understanding of this market and understand the nuances of the new-build mortgage journey.

Doing so will ensure they can help their clients find the right lender to secure the keys to their brand-new home.

Jonathan Stinton is head of intermediary relationships at Coventry for Intermediaries

This article featured in the March 2023 edition of MS.

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Finopulse

Disclaimer: This story is auto-aggregated by a computer program and has not been created or edited by Finopulse.
Publisher: Jonathan Stinton

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