Getting a Mortgage to Buy an Off-Plan Property

Find out how to get a mortgage if you’re buying an off-plan property.

Is the property of Non-Standard Construction?

Home Property Types Getting A Mortgage To Buy An Off-Plan Property

Author: Pete Mugleston

Mortgage Advisor, MD

Reviewer: Jon Nixon

Director of Distribution

Updated: March 18, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

March 18, 2024

Buying an off plan property comes with many advantages, but it can affect your options for a mortgage

Here we look at how you can get a mortgage if you’re buying off plan and how a broker can help in these situations. We also identify what specific eligibility criteria is involved and if you need to pay stamp duty..  

Can you get a mortgage for an off plan property?

Yes, you can. You’ll need to meet a number of lending criteria to be approved and how much you can borrow will be determined by two main factors – your income and outgoings.

Buying a property off plan means purchasing it before it has been finished. It’s possible to do this by looking at the developer’s plans which detail square footage and room layouts.

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What are the benefits and disadvantages of buying off plan?

Buying off plan can be great in some situations, but it can also come with some potential downsides too, such as:

Benefits

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Guarantees - many new builds come with a guarantee for the property. Sometimes they’re up to 10 years long. It means that should anything go wrong with the building, you are covered for any work required.

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Newly decorated - The majority of new builds are decorated in neutral tones to appeal to a wider range of buyers so everything will be brand new when moving in.

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Your own specification - You may have to pay more, but some new developments finish a home to the purchaser’s specification. It means you can pick out fittings and fixtures from the start, so you further reduce any need to do any decorating.

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Developer discounts - Discounts are often offered by developers off plan which can be anything up to 5% or agreeing to pay stamp duty.

Disadvantages

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Delays - One of the biggest risks is if developers don’t stick to their timetable. It means your move-in date could be indefinitely delayed.

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Mortgage agreement expiration dates - Other than the stress of having a move date consistently delayed, the building work taking longer can mean your mortgage offer runs out. It may mean you have to reapply.

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Fewer mortgage provider options - Not all providers are happy to lend on properties that are off-plan. It may mean you are forced to accept a mortgage offer with worse terms than you had hoped.

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Restrictive covenants - Developers are increasingly putting restrictive covenants into their property deeds. Restrictive covenants can prevent you from doing many things in the future with your property, like extending. Or, sometimes, it can mean you have to pay the developer for permission to extend or renovate your home.

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Depreciation - New builds often depreciate in value as soon as you move in. They’re often on large mass development projects, so when you’re in, your home loses its appeal in comparison to the rest of the brand new properties in the same area. That being said, given the right market conditions, your property price could increase between when you reserve it with your developer and when you move.

How a broker can help when you buy off plan

When it comes to buying off plan, lenders are often more hesitant to offer their lowest interest rates. To maximise your chances of securing a mortgage with the most favourable terms, you should enlist the help of a broker.

Experienced brokers will know which developers offer the best incentives – like paying your stamp duty for example – so that you can increase your deposit instead, strengthening your position for your application. With a higher deposit, you may be able to secure a mortgage with a lower interest rate, thus making your repayments cheaper.

The brokers we work with already have experience arranging mortgages for off plan properties.  Get in touch with us today so we can connect you to an expert in this field.

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Which lenders offer mortgages for off plan properties?

Several well-known lenders would potentially consider an application for a new build purchase off plan, such as Barclays, TSB, Natwest and Halifax.

Some may place certain conditions before agreeing to the home loan. For example, The Family Building Society won’t lend on new build flats and many require the property to be revalued at completion. HSBC asserts that it won’t release funds until the property has been completed. So even if you are eligible for some products, their specific terms and conditions may make them unsuitable for you.

What specific eligibility criteria is involved?

All lenders have different approaches when it comes to assessing a person’s eligibility for a mortgage. That means looking at a person’s deposit, their employment type, age and credit history – among other lender specific demands.

When it comes to off plan mortgages, lenders will likely also want to confirm the purchase price you have offered is fair. They’ll arrange for a mortgage valuation on the property – both when they offer the mortgage and when the property is completed. If the property value changes, this could affect your offer and then your ability to complete so there is the risk of losing your deposit. Your deposit is usually paid when you’ve been approved for a mortgage in principle. This deposit secures your property with the developer.

The other issue to remember is your mortgage offer may only be for a set amount of time – often six months. If your house hasn’t been completed by then, you may have to reapply and be subject to another eligibility assessment with your chosen lender.

How will the property type affect a mortgage application?

The type of property can affect the perceived risk for mortgage providers. For example, non-standard construction builds can be more difficult to sell. That makes lenders less likely to extend you a mortgage as the perceived risk is higher.

When it comes to off-plan new builds, look out for the properties which require expensive materials or maintenance. They may make a property harder to resell.

Do you pay stamp duty?

Yes. You will need to pay stamp duty for an off-plan property and any Land Registry charges. It is calculated based on the price you pay, and not the market value.

Use our calculator below to see how this may work out for you, based on the off-plan property you’re wanting to buy:

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Stamp Duty Calculator

This calculator can tell you how much Stamp Duty Land Tax you will need to pay on your property purchase, whether you're a first-time buyer, a home-mover or in the market for an investment property.

Enter an amount in pound sterling
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Your stamp duty to pay is:

Your effective tax rate is

Now that you've worked out how much stamp duty is payable, it's a good idea to talk to a broker about your mortgage options. Their knowledge and expertise can help you make sure you aren't paying over the odds with all costs and fees factored in.

Can you use the shared ownership scheme?

Yes, this is possible. It can make getting on the property ladder easier as shared ownership schemes would mean you need a lower mortgage so the number of providers available to you may increase. As a result, you could find you can choose a product with a lower interest rate making your repayments cheaper too.

You’ll need a plan, however, for how to purchase the rest of the property or what you will do when you come to sell your home.

Speak to a broker experienced in off plan mortgages

Buying off plan can be a great opportunity for many, but it can prove more difficult to get a mortgage. Speaking to a broker can be a great idea as they will have specialist knowledge on who to approach given your situation.

Our no-obligation, free broker matching service can put you in touch with the best mortgage advisor for your off plan buying needs. Call us today on 0808 189 2301 or make an enquiry so we can arrange for a broker to speak with you.

Maximise your chance of approval with a broker who specialises in getting a mortgage for off plan properties

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects.

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FAQs

Technically speaking, you could avoid paying stamp duty if you buy the property off plan but sell it before the property is finished. However, if that is your plan, it comes with the risk that you may not be able to sell it in time for completion day at which point you become liable for stamp duty tax.

You’ll need an off plan assignment mortgage if you want to buy a property off plan and then sell the contract before it is completed. Some of the brokers we work with have experience in this area, so it’s well worth getting in touch for a chat if this is a route you’re looking to pursue.

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About the author

Pete, 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 found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with 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!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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