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How to Compare NewBuy Mortgages

by DanB from

The government's NewBuy Scheme could be the helping hand you need to buy a house - provided you choose a new-build home, that is. Our guide helps you find the best NewBuy mortgages out there.

couple see property with agent

Purchasing a house without a large deposit can be difficult, especially if you're not yet on the property ladder or are stuck in a home that doesn't suit your needs without having built up much equity.

Lenders prefer to avoid what they see as risky loans, but luckily there are some schemes out there that can help mitigate their risks meaning they'll be more likely to lend to you. One of these is the NewBuy scheme, launched in March 2012.

What are NewBuy mortgages?

The scheme was developed to help those who would struggle to afford their first home or move from an unsuitable house because of the large deposits now required to get a mortgage.

Under NewBuy, the lender provides a 90-95% loan to value mortgage on a home built by a participating developer, so the buyer only needs to raise a deposit of 5-10%. Lenders are willing to offer the loans because they are underwritten by the builders and the government in turn, making them far more secure.

NewBuy is the forerunner to the government's Help to Buy scheme announced in the 2013 Budget, but isn't scheduled to end until March 2015 so it is still worth looking into.

Who is eligible?

To be eligible for a NewBuy mortgage, you must be either a UK citizen or have the right to remain indefinitely in the UK. The scheme is open to homeowners as well as first time buyers; but while there's no limit on your income, lenders will still assess your ability to pay down the loan.

Additionally, the homes covered by the scheme must be:

  • New builds being sold for the first time
  • Priced 500,000 or less
  • Owned fully by you, rather than shared ownership
  • Your primary home, so not a second home or a buy to let property
  • In England, although similar schemes have also been introduced in Scotland and Wales
  • Constructed by a builder taking part in the scheme

Is a NewBuy mortgage cheaper than a normal mortgage?

Although you'll find that the interest rates are generally higher than most normal mortgages, the scheme is designed to help if you wouldn't otherwise be able get a mortgage at all.

What to look for

There are six companies that offer NewBuy mortgages. Each builder has a chosen a lender, so you would need to apply for your NewBuy mortgage using that provider:

  • Woolwich
  • Santander
  • Halifax
  • Aldermore
  • NatWest
  • Nationwide

How to compare

One of the most important factors when you choose a lender will be that they work with a builder that offers homes in the area you want, so it will probably be best to first find the property you want, then look into what lenders they use.

Our NewBuy mortgage comparison will help you to evaluate the rates on offer, and a NewBuy mortgage calculator will let you know what properties you can afford and how much your monthly payments might be.

Be sure to check for any fees or charges on each product you consider, as these will influence how much your mortgage coasts in total.

The interest rate you pay will also be very important in determining your monthly payments, so shop around as best you can for the best new buy mortgage rates on offer.

You should also make sure that other schemes don't suit you better. The Help to Buy scheme offers a larger choice of rates thanks to the wider selection of properties and lenders it covers, and Help to Buy Part 2 isn't restricted to new-builds only.

Alternatively, there are more lenders now offering mortgages separate from the government's schemes that require a deposit of just 5% or 10%, with or without a guarantor, so it's worth checking those too.