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How To Finance Your New Build Home: Loan Options And Tips

Finance BY Shahanawaz Aug 08, 2023

New build homes are a great option for most homeowners, no matter whether you’re a first-time buyer, upsizing for your growing family, or downsizing once the kids move out. A new build home usually features a contemporary design with spacious living areas and can be far more energy-efficient than older homes.

The UK government is aiming to build 300,000 new homes every year in areas all around the country, which will increase your chances of finding the ideal one for you. With all these queries and many other things, let us start with this comprehensive guide. 

Make sure to read it till the end as you are about to unravel a lot of home financing secrets.

Why Is It Significant To Finance Your House? 

The fact that there is an immense shortage of residential units all across the world is not new. As per a report by the United Nations, 66% or more of the overall population resides in urban centers. While this is good news for the nation’s infrastructure, it might pose a serious threat to house shortages and their skyrocketing prices. 

The same report is most likely pointing out that the number of residents in urban centers might double up in the upcoming 20 years. Thus, there might be a serious impact on the overall economy if urgent housing is not created. In several nations, this problem is worse because it is not spread out evenly. 

In all these countries, there are four or five urban centers that have been financed 50% for housing. Moreover, there has been an environment of unsafe and unhygienic living in large cities. Coming back to the question, financing housing units while you build home is the need of the hour- considering the urgent requirement of safe living. 

Options To Finance Your New Abode

Once you find the place you want to call home, however, you’ll then need to think about how you want to finance your new property. The main options you’ll have include self-build mortgages, help-to-buy schemes, and incentives provided by developers. Read on to learn more about them all.

Self-Build Mortgages

Self-Build Mortgages

This mortgage is mainly for those who want to build home themselves. The key difference between this mortgage and a standard one is that you receive the loan in stages as different parts of the house construction take place instead of just one lump sum. This is necessary in order to reduce the risk for lenders and ensure the money is being spent correctly in line with your budget.

The main benefit of choosing this type of financing is you can save on stamp duty. Also, it can work out cheaper than buying an existing property off the market, and your property might have a higher worth than what you paid at the time of completion. However, these mortgages aren’t without risk, and you may lose money if things don’t go to plan, and it can also be time-consuming.

Help To Buy Scheme 

Help-to-buy schemes are useful for first-time buyers to get them on the property ladder. This scheme is where the government offers an equity loan to those buying their first house. You need to put down a 5% deposit to qualify for this, and you can borrow up to 20% of the purchase price – or 40% in London –  in return. The rest of the mortgage will then be borrowed from a lender.

The benefits of choosing a help-to-buy scheme are that you only need a small deposit, you can access low mortgage rates, and the money you borrow from the government is interest-free for five years. However, the disadvantages of using this scheme include limits on house purchase prices and variable repayment rates, and it can be difficult to find help to buy a mortgage.

Developer Incentives 

You can sometimes take advantage of incentives from the developers of the newly built property, too, which can help you save money on your purchase. Some common ones you may find include paying your deposit, assistance when you sell the property in the future, part-exchange of your current home for the new build, as well as financial support for things like legal fees and stamp duty.

Utilizing incentives bears very little risk. So you must always take advantage of it if you can afford to pay the mortgage on the newly built property that you want.

Now that mortgage rates have started to drop slowly, it may be the ideal time to start your search for a newly built home. Consider the three finance options above when you build home for you, and make sure you fund it in a way that suits your financial position.

The Role Of Housing Finance Industries… 

In most parts of the world, the concern about less housing finance is quite evident. But even then, a lot of banks refrain from providing loans to individual housebuyers. Commercial enterprises usually want to conduct business with industrialists, the reason being their large loan ticket size. As a result, the transaction for these loans is quite large in size. 

In contradiction, if a bank offers housing finance, it has to look for several people who are in search of smaller loans. Again, they have to charge higher costs for transactions. It is no secret that housing loans usually last for a long time. This indicates that the bank has its funds tied up in prolonged assets. Here’s why housing finance industries come into existence. 

Wrap Up

Building your own house from scratch is not an easy endeavor. Although it takes a lot of time, hard work, and patience, the result is rewarding. Various factors are considered before you set your foot. And choosing the right housing company is no exception. 

Make sure to leave your house financing in the right hands. Don’t shy away from involving a qualified house builder when you build a home. Considering the aforementioned tips, you can surely save up adequate money. With this, I put a subtle end to my comprehensive guide. Thank you for reading it till the end. I hope it helped!

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Shahnawaz is a passionate and professional Content writer. He loves to read, write, draw and share his knowledge in different niches like Technology, Cryptocurrency, Travel,Social Media, Social Media Marketing, and Healthcare.

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