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Guide to NewBuy mortgages

Published by FTAdviser | Jul 26, 2012

Those looking to buy a new home, with a lack of cash in their savings account, now have the option of the NewBuy scheme.

The NewBuy scheme is aimed at first-time buyers and those who already own a home who only have funds for a 5 per cent to 10 per cent deposit on a newly built home in England.

This guide tackles the pros and cons of the scheme, how to source the best deal and how to qualify for this type of mortgage.

Answers supplied by Jayne Walters, press officer of the Council of Mortgage Lenders, and Andrew Baddeley-Chappell, head of mortgage strategy and policy on the NewBuy scheme for Nationwide.

  1. Q: What is the NewBuy Guarantee?

    NewBuy is a new build indemnity scheme supported by the government.

  2. Q: Who is eligible for a NewBuy mortgage?

    Any UK citizen or person with indefinite leave to remain who is purchasing a new build property for their main residence is eligible.

  3. Q: What properties are eligible for a NewBuy mortgage?

    The scheme has a maximum property value of £500,000 and repayment mortgages only are being offered.

  4. Q: What are the pros and cons of NewBuy mortgages?

    The rates on these products are lower than would be available for an equivalent mortgage at the same LTV on a property outside of the scheme,...

  5. Q: What are the FSA requirements for NewBuy advice?

    All loans advanced under the NewBuy scheme will need to comply fully with regulatory requirements for mortgage lending.

  6. Q: What are the alternatives to a NewBuy mortgage?

    There are other schemes for first-time buyers, such as shared equity/ownership, FirstBuy, etc.

  7. Q: How can I source the best deal?

    As of summer 2012, only a handful of lenders are offering NewBuy mortgages.

  8. Q: What information will the lender require?

    The lender will need to know that the builder building the property is partnered with them and that the property is being offered as a NewBuy...

  9. Q: How can I make sure my client gets a decision quickly?

    The nature of the NewBuy scheme means not all builders will be working with all lenders.

Finished reading this article? Bank 1hr Structured CPD below.

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Q1.  What loan-to-values are offered on NewBuy mortgages for those buying new-build properties?

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Q2.  How much protection is offered to lenders offering NewBuy mortgages?

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Q3.  What is the maximum property value that will qualify for the NewBuy guarantee?

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Q4.  How have lending criteria been relaxed by participating lenders?

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Q5.  How are the FSA’s requirements for providing advice different from other mortgage issuance?

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Q6.  Which lenders will borrowers be able to choose from?

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