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New build buy to let mortgages

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 28th October 2019 *

Builders and developers work hard to sell the dream of a shiny, new home to prospective buyers and investors, but take a beat before you commit. Especially if you're thinking of investing in a new build as a buy-to-let property.

We've written this article about getting a mortgage on new build buy-to-lets to help you decide if a new build is the right investment for you. In it we cover:

If you prefer to skip the reading and do some talking, call 0808 189 2301 or make an enquiry for a free, no obligation chat. We'll match you with one of the expert mortgage brokers we work with.

Because all the mortgage experts we work with are whole-of-market brokers, they will be able to search the entire UK buy-to-let market and find the right mortgage solution at the best available rate for you. 

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Can I get a buy to let mortgage on a new build property?

It is indeed possible to get a buy to let mortgage on a new build property, but your choice of lender will be fewer as many view these properties as higher risk.

New build buy to lets are attractive to some investors, as they can be more energy efficient and cheaper to maintain than older properties. Essential development work shouldn’t be needed in advance and the property is ready to generate rental income from the off.

Purchasing buy to let new builds can also be cost-effective if done off-plan, i.e. before the development is completed. Not only is there a chance the property will increase in value by the time it is finished, some developers offer discounts of up to 5% to early investors.

However, off-plan purchases can also come with increased risk since the buyer is investing in a vision, rather than a completed project - so it’s important to weigh up variables such as the possibility of the property decreasing in value and delays during development.

How are buy to let new build mortgages treated differently?

As we’ve already touched on, they may require a specialist lender and their eligibility criteria is typically more stringent than for older properties. For instance, new build buy to lets typically come with higher deposit requirement - around 35% is standard - due to the increased risk the mortgage provider is taking on. The minimum deposit you would normally need for a buy to let property which is not a new build is 15%.

Some new build lenders in the buy to let sector also prefer borrowers with landlord experience, as that will also decrease the perceived risk on their part.

If you’re in the market for a buy to let mortgage on a new build property, get in touch and the whole-of-market advisors we work with will connect you to the specialist lenders offering the best rates to somebody in your circumstances.

How is affordability for new build buy to lets calculated?

The lender will calculate this in much the same way as they would for older properties. Whether you can afford a BTL mortgage on a new build property will likely be based on the viability of the investment. In other words, whether the forecast rental coverage is high enough to cover the mortgage payments. Most lenders expect 125-140% rental coverage

In addition, some lenders might have minimum income requirements. It’s not unheard of for BTL mortgage providers to only deal with customer who earn at least £25,000 per year.

What else affects new build buy to let mortgage eligibility?

Aside from the higher deposit requirements, the eligibility criteria for new build buy to let mortgages is no different than for older properties, but given that new builds are a niche area of BTL lending, it’s vital to seek specialist advice if any of the below applies…

If you fall into two niche lending categories (i.e. new builds and any of the above) it’s important to consult with a broker who has access to the entire market to ensure you end up with the best rates. Make an enquiry to speak with one on the phone today.

Is buying a new build flat a good investment?

The most important consideration when you're looking to buy-to-let is to ensure your investment is sound for the long term. Always make sure the rental yields will be high enough to cover all your costs to avoid running into financial difficulty.

Although you might expect shiny new apartments to attract a high rent, in fact some new build developments can have a significantly low rental yield. Sometimes this can be as low as 3% or 4% which is far too low for a viable buy-to-let investment.

Before you succumb to the dream sales pitch, be sure to go over your sums really carefully. The rental income you get needs to cover running costs, management fees and maintenance, all of which may prove to be more than you estimate.

To get advice on this, or any other aspect to do with buy-to-let mortgages, make an enquiry and we'll match you with one of the expert brokers we work with.

Do new homes appreciate faster?

Don't invest in a new build with the expectation that it will automatically appreciate in value faster than an older property.

While it's true that some builders offer significant financial enticements to invest, you won't necessarily see your property rise in value on the strength of a good price when you purchase.

Do new builds depreciate in value?

As with new cars, which depreciate in value the moment you drive them off the forecourt, brand new homes don't stay new forever!

If you're forced to sell a new build home within 24 months of buying, make sure you can cover your costs before moving on.

Speak to an expert

If you're thinking of investing in a new build property with the intention of renting it out to tenants, give us a call on 0808 189 2301 or make an enquiry. We'll match you with one of the expert mortgage brokers we work with. 

The experts we work with are all whole-of-market mortgage brokers with access to lenders across the entire UK. They will be happy to answer all your questions and help you find the right mortgage at the best available price.

The service we offer is free, there's absolutely no obligation and we won't leave a mark on your credit rating.

Updated: 28th October 2019
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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