New Build Mortgage Valuations
Find out everything you need to know about how new build mortgage valuations work.
Author: Pete Mugleston
CeMAP Mortgage Advisor, MD
Do all new build mortgage lenders want a valuation?
No, not all. However, in most cases, they will, so it’s best to be prepared for one to be requested. Developers set a price for new properties, and lenders usually want to check this for themselves with an independent valuation.
This is because they will want to ensure the property is valued fairly. Otherwise, they risk lending too much money, meaning they wouldn’t recoup their full investment in case of repossession. That being said, there can be rare instances when new-build lenders do not conduct a valuation (perhaps if they have an ongoing relationship with the developer).
Lenders conduct their valuations ‘off-plan’, essentially how it sounds. The blueprints, plans, specifications, and marketing material are typically used.
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What to do if a new-build home loses value
It’s common for a brand-new home to be valued at a lower price than the developer sets because lenders will have their own valuation criteria. If this happens and your lender’s valuation is below the market price, it will alter the new build loan-to-value (LTV) and might mean you can’t get a big enough mortgage.
If this is the case, don’t fret. But, you may need to take action to keep your home purchase alive. Here are your main options if you get a down valuation on a new-build property:
- Renegotiate: Your chosen lender may not budge, but it’s always worth discussing your situation with the property developer to see if they are willing to negotiate on the sale price. This isn’t a foolproof strategy because if the properties are in high demand, the developer might find another buyer—but it’s still worth a try. On a standard property purchase, challenging the valuation usually requires evidence of three similar properties sold within the area for a similar price.
- Use a bigger deposit: This may not be practical for your finances, but if you can use a larger deposit, this will reduce the amount you need to borrow with your mortgage. If you can’t afford to put more money towards your deposit, it may be worth exploring gifted deposits or alternative solutions like family offset and guarantor mortgages.
- Speak to a new lender: If your current lender isn’t willing to let you borrow the amount you need, it may be worth approaching someone else. A new lender may have a different way of valuing new builds or simply be willing to let you borrow more by using a higher income multiple when calculating your mortgage affordability capacity.
- Enquire about any builder’s incentives: Typically, the developer offers a small percentage as part of your deposit or increases the value via a higher specification and sometimes white goods.
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How a specialist new build mortgage broker can help
If your new-build property valuation is lower than the asking price, it could put your home-buying plans on hold. The best way to overcome this obstacle is with the guidance of an expert mortgage broker. Speaking with a mortgage advisor specialising in new-build properties means they will have in-depth knowledge of this market.
They’ll know precisely how each lender values a property, allowing them to introduce you to the most suitable lender who will be the most accommodating to your plans. Along with introducing you to the right lender, a skilled mortgage advisor can also help manage your application from start to finish.
Having an expert in your corner throughout the process means they can answer any questions and find you the best new-build mortgage solution with unbeatable rates. If you’d like to speak to an experienced new-build mortgage broker, just make an enquiry, and we’ll introduce you to one.
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Do new-build homes depreciate in value?
They can, but each situation will be unique. If you want to sell a new build property on an estate or in an area with other properties that are still brand new – those properties may attract more buyers and a higher price tag than your second-hand home.
Also, new-build properties tend to be valued at a premium, just like a new car. So, naturally, once the house loses its ‘new’ status, this can lead to an immediate depreciation in value.
Are new builds hard to sell?
In some situations, yes. This is because with a new build house, there are some additional factors to take on board when it comes to selling the home:
- There’s a higher risk of the property depreciating faster than other types of houses.
- Potential competition from other new homes nearby.
- Sometimes, buying incentives for new builds are available only to first-time buyers if the house has already been bought and lived in.
- If the rest of the development isn’t complete, the idea of ongoing building work can put off prospective buyers.
- New builds can be smaller than older but similar properties with a lower asking price.
- Of course, there is an additional time factor. It may take months or even a year for the property to be completed. Be sure to discuss this with your mortgage advisor, as the expiry date on the mortgage offer may be impacted by this.
Speak to a broker who specialises in new-build mortgages
When you’re looking to purchase a new-build home, advice from an expert mortgage broker is essential if you want to make sure the valuation process goes smoothly and you don’t pay more than you need to.
We offer a broker-matching service. This means we’ll quickly assess your property ownership goals and then introduce you to a mortgage advisor specialising in new-build properties.
Just call 0330 818 7026 or make an enquiry. We’ll arrange a free, no-obligation chat between you and your ideal mortgage broker today.
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FAQs
They’re usually more expensive than a comparable second-hand property. New builds tend to be more energy efficient, come with brand new fixtures and fittings, use more expensive construction materials, and are typically well-located.
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Pete Mugleston
CeMAP Mortgage Advisor, MD
Pete, a CeMAP-qualified mortgage advisor and an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete successfully went the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained and his love of helping people reach their goals led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!
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