New Build Mortgage Rates: Benefits for Builders and Buyers

New build mortgage rates offer a unique set of benefits for builders and buyers alike.

For builders, new build mortgage rates can provide a competitive edge in the market. They can offer buyers more affordable financing options, which can increase the appeal of their properties.

Buyers, on the other hand, can take advantage of lower interest rates and more flexible payment terms. This can make the dream of owning a new home a more realistic goal.

Builders can also benefit from the increased demand that comes with offering new build mortgage rates.

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To access the Own New Rate Reducer scheme, you'll need to speak to one of the participating housebuilders to find a home available through the scheme.

They will then refer you to a specialist mortgage broker partner who will help progress your application.

Despite having a stable income, some people struggle to secure a mortgage, while others with wealthy parents enjoy a more straightforward route to buying.

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Own New works closely with each lender to give customers the full benefit of the developer contribution by reducing their interest payments by at least the same value as the incentive.

Builders can help lower mortgage rates by buying points on the mortgage that a potential buyer is offered from a lender.

This can be done by paying a fee upfront to lower the interest rate offered on a loan, either permanently or temporarily.

For example, a builder might agree to pay $5,000 to lower the loan rate by 0.25%, which would reduce the mortgage rate from 8% to 7.75%.

Note that many lenders will limit the number of points you or your builder can buy down, and not all rate buydowns are permanent.

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New build mortgage rates offer several advantages. They often come with lower interest rates compared to remortgaging an existing property.

For example, a study found that new build mortgage rates averaged 2.5% lower than remortgaging rates over a five-year period.

New build mortgage rates can also provide more flexible repayment terms. Some new build mortgages allow for overpayments without penalty, giving homeowners more control over their finances.

This flexibility can be particularly useful for homeowners who experience a change in income or expenses.

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The lower interest rates offered by Own New come with some significant downsides. These rates are only guaranteed for the first two or five years, so borrowers will likely face a substantial jump in their interest rate - and thus their monthly repayment - when they come to remortgage.

This means that while the lower rates may be appealing at first, they could lead to a big increase in monthly payments down the line. To mitigate this risk, Own New requires borrowers to get advice from a specially-trained mortgage broker before applying, and mortgage lenders will undertake their usual stress-testing to ensure the applicant could afford repayments if the rate went up.

However, this scheme won't be the right option for everyone. You'll need to consider the following:

Buying a home can be a daunting task, but it's a great opportunity to own a piece of property and build equity over time. You can more accurately predict monthly homeownership costs in a new construction home, which is a big advantage.

Newly built homes require less maintenance, which means you'll spend less time and money on repairs. This is because everything from appliances to electrical, plumbing, and HVAC systems is brand new.

New homes today are built with state-of-the-art products and materials that meet the latest building codes. This results in a better-built home that is more energy-efficient and environmentally friendly.

You can expect lower utility bills in a new construction home, thanks to energy-efficient windows, better insulation, and new heating and air conditioning systems. This is a great perk for homeowners who want to save money on their utility bills.

A new home can be a "smart" home, with technology options that allow you to automate lighting, entertainment systems, alarm systems, thermostats, garage doors, and exterior door locks. This can be controlled remotely, giving you peace of mind when you're away from home.

Here are some of the key benefits of homeownership in a new construction home:

With a construction loan, you can avoid pre-payment penalties, which means you won't be charged extra for paying off your loan early.

You can also shrink your loan term by making extra payments to your principal balance, giving you more flexibility in your financial planning.

Once construction is complete, your loan will easily convert to a standard fixed or adjustable-rate mortgage, eliminating the need for a second closing.

This convenience can save you both time and money by avoiding the hassle of multiple loan closings.

Here are the benefits of a construction loan at a glance:

You can enjoy the flexibility of making extra payments to your principal balance, which can help you shrink your term and save on interest.

Pre-payment penalties are a thing of the past, giving you peace of mind as you work on your construction project.

Once construction is complete, your loan will easily convert to a standard fixed or adjustable-rate mortgage, eliminating the need for a second closing.

This convenient feature saves you both time and money by avoiding the hassle of multiple loan closings, making the process much smoother.

Builders can help lower mortgage rates by buying points on the mortgage from a lender, essentially paying a fee upfront to lower the interest rate offered on a loan.

This can be a win-win for both the builder and the buyer, as the buyer gets a lower mortgage rate and the builder can sell their homes more quickly.

Builders are more likely to use this tactic with first-time homebuyers who are more interested in solid financing than in fancy cosmetic touches.

By lowering the rate now to what might be available via refinancing in a few years, new homeowners can avoid the hassle and cost of the refinancing process down the line.

For example, a builder might agree to buy down a mortgage rate by 0.25% in exchange for a point, which costs 1% of the total loan, or $5,000 in this case.

If the builder buys down 0.75% off of the rate, they would need to purchase three points, costing about $15,000.

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This can result in a mortgage rate of 7.25%, which may seem high but could be a good deal in today's rate environment.

Not all rate buydowns are permanent, and some may only be temporary, reducing the mortgage rate for the first couple of years before increasing to the regular rate.

The Own New Rate Reducer scheme can significantly reduce your monthly mortgage payments by using incentive budgets from housebuilders. This can be a huge help for new homebuyers.

For example, if a housebuilder offers a 5% incentive, it can be directly offset against the mortgage interest, lowering your monthly payments. You can choose to spread the benefit across the first two or five years, depending on your lender's criteria.

Virgin Money offers an introductory two-year mortgage rate of 4.79% with a £999 fee, but with the incentive budget, the rate can be cut to 0.99% at 60% LTV with a £495 fee.

The Rate Reducer scheme works by using the incentive pot put aside by the housebuilder and offsetting it against the buyer's mortgage rate. This allows the buyer to benefit from cheaper repayments.

Housebuilders often offer incentives to tempt buyers, such as free stamp duty and legal fees, or cashback on completion. These incentives are then used to reduce the buyer's mortgage rate.

The buyer can qualify for a mortgage rate of below 1% with the Rate Reducer scheme. This can lead to significant savings on mortgage repayments.

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The Own New Rate Reducer scheme is a clever way to reduce your monthly mortgage payments. It uses incentive budgets offered by housebuilders to customers, which are directly offset against mortgage interest.

For example, if the housebuilder offers a 5% incentive, this sum is taken and used to reduce monthly payments. Buyers can choose to spread the benefit across the first two or five years, depending on their lender's criteria.

The incentive budget is invested in the mortgage upfront, which can lead to significant savings. For a new home worth £300,000, the introductory two-year mortgage rate of 4.79% could be cut to 0.99% at 60% LTV with a £495 fee.

By cutting the monthly outgoings initially, the customer is able to pay more off the capital value of their mortgage. This is because the interest charged on the loan is lower, making it easier to pay off the mortgage.

Builders can lower mortgage rates by buying points on the mortgage that a potential buyer is offered from a lender. This means they agree to pay a fee upfront to lower the interest rate offered on a loan.

For instance, if a lender offers a mortgage rate of 8% on a $500,000 loan, the builder can buy down the rate by 0.25% for every point purchased, at a cost of 1% of the total loan. This can result in a mortgage rate of 7.25% after purchasing three points.

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Builders use this tactic to sell homes quickly, especially to first-time homebuyers who are more interested in solid financing than in fancy cosmetic touches. They'll explain to these potential buyers that they'll save them time and effort in the long run.

By lowering the rate now to what might be available via refinancing in a few years, new homeowners can avoid the hassle and cost of the refinancing process down the line.

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Sub-1% mortgage rates are indeed possible through the Rate Reduction scheme, which offers a cheaper rate during a fixed mortgage term.

In fact, Own New suggests that rate reductions of up to 4% may be available, depending on various circumstances such as the size of the incentive pot and the lender used.

For example, if a housebuilder invests an incentive equal to 5% of the home's value, the mortgage rate for someone borrowing at 60% loan-to-value could be reduced to just 0.99%, which is around 3% cheaper than the current market-leading deal.

This is a significant reduction, and one that could save you a substantial amount of money over the life of your mortgage.

A potential rate of 1.83% is also available for someone borrowing at 75% loan-to-value, and 3.78% for someone borrowing at 90% loan-to-value.

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