Secured Loan on a New Build Property

The New Build Premium and Value Depreciation

New build properties are typically priced at a premium over equivalent second-hand properties in the same area — reflecting the brand new condition, developer marketing costs, the warranty included in the purchase and the consumer preference for new homes. This new build premium is often estimated at between 5% and 15% above comparable second-hand property values, though it varies by location, developer and market conditions.

The practical consequence for secured lending is that if a new build property is sold within the first few years after purchase, it may achieve a lower price than the original purchase price — particularly if the buyer paid over the odds during a period of strong developer demand. Lenders are aware of this and factor it into their assessment of the maximum loan-to-value they are willing to offer on new builds.

Many lenders apply a reduced maximum LTV for new build properties in the first two years after completion — commonly capping at 75% rather than the 80-85% available on established properties. After two or three years, once the property has an established market value based on comparable resales in the development, lenders often revert to standard LTV limits. If you purchased your new build property some time ago and its value has increased, this restriction may no longer apply.

NHBC Buildmark and Other New Build Warranties

Most new build homes in the UK are sold with a warranty — the most widely known being the NHBC Buildmark warranty, which provides cover for structural defects for 10 years from the date of practical completion. Other widely used warranties include LABC (Local Authority Building Control) Warranty, Premier Guarantee and Zurich Municipal. These warranties are a key component of the new build purchase package and are typically required by mortgage lenders as a condition of lending on a new property.

Secured loan lenders will also want to be confident that an appropriate warranty is in place, as it protects the security value of the property in the event of structural defects. In practice, most new builds less than 10 years old will have a warranty in place, and the key detail for lenders is which warranty provider is used and whether the warranty is still active.

For properties that are approaching or have passed the 10-year warranty period, the absence of a warranty is not generally a barrier to secured lending — the property will be assessed on its current condition by the valuer rather than relying on warranty protection. However, evidence of good maintenance and the absence of defects will be important.

Developer Incentives and Their Impact on Lending

When purchasing a new build property, developers frequently offer incentives to buyers — these might include cashback, contributions to stamp duty or legal fees, furniture packages, free upgrades, or guaranteed rental income for a period. While attractive to buyers, these incentives can create complications for lenders because they effectively reduce the true cost of the purchase below the headline asking price.

Lenders are required to be told about any incentives received as part of a new build purchase and typically deduct the value of the incentives from the purchase price when calculating LTV. For example, if you bought a property for £300,000 with a £15,000 developer cashback incentive, the lender may treat the effective purchase price as £285,000 for LTV calculation purposes.

On a secured loan application for a new build, lenders will check whether any incentives were received at the time of purchase and may adjust their valuation accordingly, particularly if the original purchase was recent and the property has not yet been independently valued in the resale market. Providing full details of any incentives received — and copies of the purchase documents confirming the original price — will help the lender and valuer assess the current situation accurately.

Which Lenders Accept New Build Properties as Security?

The good news for new build owners is that the majority of secured loan lenders will accept new builds as security, unlike some of the other property types discussed elsewhere on this site. The restrictions are primarily around LTV ratios and the recency of the purchase rather than outright exclusions. Most lenders become significantly more comfortable once a new build is two to three years old and has an established value based on comparable sales within the development.

For very recently purchased new builds — within the first 12 months — lenders may be more cautious, particularly if the development is not yet complete or if comparable sales are limited. In these cases, the valuer may struggle to provide an accurate open market value, which makes lenders nervous about the security they are being asked to accept.

Help to Buy equity loan properties (for those who purchased using the Help to Buy scheme) add an additional layer of complexity, as the equity loan from Homes England must be considered in the LTV calculation and Homes England's consent may be required for a second charge. The Help to Buy scheme closed for new applications in 2023, but existing equity loans remain in place and can affect secured lending options for years to come.

A broker who regularly handles new build secured loans will know which lenders are comfortable with recently completed properties and can match your application to the most appropriate lender based on the age and characteristics of your property.