Remortgage a New Build

Can You Remortgage a New Build Property?

Yes, you can remortgage a new build property, and thousands of UK homeowners do so every year. Once your initial fixed rate, tracker, or discount period ends, you will typically revert to your lender's standard variable rate (SVR), which is almost always significantly higher. Remortgaging allows you to switch to a new deal, either with your existing lender or a different one, to keep your monthly payments as low as possible.

However, there are a few specific factors that lenders consider when assessing remortgage applications on new build homes:

• Property age and warranty status — Most lenders require the property to have a valid structural warranty, such as an NHBC Buildmark, Premier Guarantee, or LABC warranty. This typically covers the first ten years after construction.
• Valuation considerations — New build properties can sometimes be valued differently to established homes. The initial purchase price may have included developer incentives, which can affect the perceived market value when you come to remortgage.
• Leasehold terms — Many new build properties, particularly flats and some houses on newer estates, are sold as leasehold. Lenders will scrutinise the lease terms, including ground rent escalation clauses and remaining lease length.
• Development completion — If the wider development is still being built when you apply to remortgage, some lenders may be cautious about the ongoing construction activity and its potential impact on valuation.

Despite these considerations, the vast majority of new build homeowners are able to remortgage without any significant difficulties, particularly once the property has been established for a few years.

Warranty Requirements for New Build Remortgages

One of the most important factors when remortgaging a new build property is the structural warranty. Almost all mortgage lenders require a valid warranty to be in place, and the type and status of the warranty can influence which deals are available to you.

What is a new build warranty?

A new build warranty is a type of insurance policy that covers structural defects in the property for a set period, typically ten years from the date of completion. The most well-known provider is the NHBC (National House Building Council), which offers its Buildmark warranty, but there are several other recognised providers including Premier Guarantee, LABC Warranty, Checkmate, and Protek.

What does the warranty cover?

During the first two years (the builder's liability period), the developer is responsible for putting right any defects that do not meet NHBC standards. From years three to ten, the warranty provider covers the cost of repairing damage caused by defects in specified structural elements, such as foundations, load-bearing walls, and the roof structure.

What happens when the warranty expires?

Once the ten-year warranty period expires, the property is treated like any other established home for mortgage purposes. Lenders will no longer require a warranty certificate, and the property will be assessed on its current condition through a standard valuation process.

What if there is no warranty?

If your new build property does not have a recognised warranty, perhaps because it was self-built or constructed by a small developer who did not register with a warranty provider, remortgaging can be more challenging. Some specialist lenders may accept alternative forms of cover, such as a Professional Consultants Certificate (PCC) or an architect's certificate, but your options will be more limited. A specialist mortgage broker can help identify lenders who are willing to consider properties without a standard warranty.

New Build Valuations and How They Affect Remortgaging

Valuations are a critical part of any remortgage process, and new build properties can present unique challenges in this area. Understanding how valuers approach new builds will help you manage your expectations and plan accordingly.

Developer incentives and their impact

When you purchased your new build, the developer may have offered incentives such as cashback, paid stamp duty, free upgrades, or a contribution towards your deposit. While these made the purchase more attractive, they can mean that the price you paid was higher than the true open market value of the property at the time. When you come to remortgage, the valuer will assess the current market value based on comparable sales in the area, which may be lower than your original purchase price.

The new build premium

New build properties often carry a premium over equivalent second-hand homes, sometimes estimated at between 10% and 20%. This premium reflects the appeal of a brand-new home with modern specifications, but it can diminish once the property is no longer new. This means that when you remortgage a few years later, the property may be valued at less than you paid for it, particularly if house prices in the area have not risen significantly.

Negative equity concerns

If the valuation comes back lower than expected, you could find yourself in a position where you owe more on your mortgage than the property is currently worth. This is known as negative equity, and it can make remortgaging difficult because lenders are typically unwilling to lend more than the property's value. If you find yourself in this situation, options include staying with your current lender on a product transfer, making overpayments to reduce your loan balance, or waiting for property values to recover.

Comparable evidence

Valuers rely heavily on comparable sales data when assessing a property's value. On newer developments where few resales have taken place, there may be limited comparable evidence available. This can make the valuation process less predictable. As the development matures and more resales occur, comparable evidence becomes more robust and valuations tend to stabilise.

Leasehold New Builds and Remortgage Complications

A significant number of new build properties in England and Wales have been sold on a leasehold basis, including some houses. While the Leasehold Reform (Ground Rent) Act 2022 has addressed some of the most problematic practices for new leases granted after 30 June 2022, many homeowners who bought before this date may still be dealing with challenging lease terms.

Ground rent issues

Some new build leasehold properties were sold with ground rent clauses that increase over time, sometimes doubling at set intervals. These escalating ground rent clauses can make remortgaging difficult because many lenders view them as a potential risk. If your ground rent could become onerous over the life of the lease, some lenders may decline your application altogether.

If you are affected by a problematic ground rent clause, you may wish to explore the following options before remortgaging:

• Deed of variation — Negotiate with the freeholder to change the ground rent terms to a fixed or peppercorn amount.
• Statutory lease extension — After owning the property for two years, you have the right to extend your lease by 90 years at a peppercorn ground rent (for flats). This eliminates the ground rent issue entirely.
• Freehold purchase — If you own a leasehold house, you may have the right to purchase the freehold under the Leasehold Reform Act 1967.

Lease length

Most new build leases are granted for terms of 125 to 999 years, so lease length is rarely an issue for remortgaging purposes. However, it is always worth checking the remaining term, as lenders typically require a minimum of 70 to 85 years remaining at the point of application.

Event fees and permission charges

Some new build leases contain provisions for event fees, such as charges for remortgaging, subletting, or making alterations. These fees can add to the cost of remortgaging, so it is important to check your lease carefully and factor in any additional charges when comparing deals.

When to Remortgage Your New Build

Timing is important when it comes to remortgaging your new build property. Getting the timing right can help you secure a better deal and avoid unnecessary costs.

When your initial deal ends

The most common trigger for remortgaging is the end of your initial mortgage deal. Whether you took out a two-year, three-year, or five-year fixed rate, once that period expires you will move onto your lender's SVR. Most lenders allow you to start the remortgage process up to six months before your deal ends, giving you plenty of time to shop around and secure a competitive rate without any gap.

Early repayment charges

If you want to remortgage before your current deal ends, you will likely face early repayment charges (ERCs). These are typically a percentage of the outstanding loan amount and can be substantial, often between 1% and 5%. Calculate whether the savings from a lower rate will outweigh the cost of the ERC before making a decision.

After the development is complete

If the wider development was still under construction when you moved in, waiting until it is fully complete before remortgaging may result in a more favourable valuation. Completed developments with established communities tend to be valued more consistently than those still in the building phase.

When house prices have risen

If property values in your area have increased since you purchased, you may now have more equity in your home, which could put you into a lower loan-to-value band and give you access to better rates. Keep an eye on local property market trends and recent sales on your development.

When your circumstances have improved

If your income has increased, your credit score has improved, or you have paid down other debts since you first took out your mortgage, you may now qualify for more competitive rates than were previously available to you.

How to Get the Best Remortgage Deal on a New Build

Securing a competitive remortgage deal on your new build property requires preparation and an understanding of what lenders look for. Here are practical steps to help you achieve the best outcome:

Check your warranty documentation

Make sure your new build warranty certificate is readily available and that it is still valid. If you have mislaid it, contact the warranty provider to obtain a replacement. Having this documentation to hand will speed up the application process.

Understand your current equity position

Research recent sales on your development and in the surrounding area to get an idea of your property's current market value. Compare this with your outstanding mortgage balance to estimate your loan-to-value ratio. Online property portals and your local Land Registry records can provide useful comparable data.

Review your lease terms

If your new build is leasehold, review your lease for any problematic clauses, particularly around ground rent escalation and event fees. If there are issues, consider addressing them before you apply to remortgage to give yourself access to the widest range of lenders.

Prepare your financial documents

Gather your proof of income, recent bank statements, details of your existing mortgage, and any other financial commitments. Being well prepared can reduce delays and demonstrate to lenders that you are organised and reliable.

Consider a product transfer

Before looking at external remortgage options, check what your current lender can offer through a product transfer. This involves switching to a new deal with the same lender and often does not require a new valuation or legal work, which can be advantageous if your property's current value is uncertain.

Use a whole-of-market mortgage broker

A broker who has experience with new build properties can be invaluable. They will understand the specific challenges, know which lenders have favourable criteria for new builds, and can help you navigate the process efficiently. Many brokers offer a free initial consultation, so there is no risk in exploring your options.