Table of Content
Introduction
For pre-owned properties, it’s fairly common to secure a mortgage with a 10% or even 5% deposit. However, new-build homes often come with stricter lending requirements, sometimes requiring a deposit of 15% or more. The good news is that some lenders offer higher loan-to-value (LTV) mortgages for new builds. It’s just a matter of working with the right lenders and using a mortgage broker experienced in arranging new-build mortgages.
Factors Affecting Your Deposit Requirements
When buying a new-build property, several factors influence the minimum deposit you’ll need. Lenders assess these to determine risk and mortgage eligibility.
Property Type
Flats usually require a higher deposit than houses because they are considered a riskier investment for lenders. Many lenders require a 15-25% deposit for flats and 10-15% for houses. Some lenders do accept lower deposits, but these figures reflect typical industry standards.
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Intended Purpose
Lenders also assess how the property will be used. If you plan to live in the property, you may qualify for a mortgage with as little as a 5-10% deposit, subject to other criteria. However, buy-to-let investors generally need to put down at least 25% when purchasing a new-build property.
Other Criteria
Additional factors such as residency status, credit score, and employment type impact your required deposit. If you have a lower credit score or irregular income, lenders may ask for a larger deposit to reduce their risk.
Affordability Considerations
While mortgages with 5-10% deposits exist, you still need to prove you can afford the loan. Most lenders offer borrowing of 4.5 to 5.5 times your income, with higher deposits and larger incomes increasing affordability. A bigger deposit can also result in lower interest rates, improving your long-term financial outlook.
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Developer Gifted Deposits
New-build developers often offer incentives to attract buyers, one of which is a gifted deposit or discount on the purchase price. Some lenders allow developers to contribute up to 5% of the purchase price toward the deposit.
For example, if you have a 5% deposit and the developer offers a 5% discount, you could reach a 10% deposit, unlocking more mortgage options and potentially better interest rates.
Government Schemes That Can Help
Buying a new-build home can be made easier through government-backed schemes designed to reduce costs and lower deposit requirements.
First Homes Programme
The First Homes Programme (FHP) is aimed at helping first-time buyers purchase a new-build property at a discounted rate. Buyers can receive a minimum 30% discount on the market value, with some councils offering as much as 50% off. The scheme is open to those earning below £80,000 per year (£90,000 in London) and looking to buy in the area they live or work in.
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Shared Ownership
Shared ownership allows you to purchase a percentage of a new-build home (usually 25-75%) while paying rent on the remaining share. This means you only need a deposit for the portion you are purchasing, rather than the full market value, making homeownership more accessible with a lower upfront deposit.
How Much Can You Borrow?
Your borrowing potential depends on your financial situation and the lender’s criteria. Typically, lenders offer 4.5 to 5 times your income, but those with deposits below 10% or lower incomes may be limited to these thresholds. Larger deposits and higher earnings can increase this multiple, sometimes up to 5.5 or even 6 times income.
Next Steps
If you’re considering a new-build purchase with a 10% deposit, speaking with a specialist mortgage broker is the best way to explore your options. At Strive Mortgages, we have extensive experience helping buyers secure mortgages for new-build homes. We’ll assess your financial situation, help you find a suitable lender, and guide you through the process from start to finish. We can also assist with obtaining an Agreement in Principle (AIP), ensuring you’re mortgage-ready before you start house hunting.
Get in touch with Strive Mortgages today to take the next step toward owning your new-build home.
FAQs
Yes, but this is usually limited to houses rather than flats. Fewer lenders offer 95% LTV mortgages on new builds compared to older properties, so your options may be restricted.
Yes, first-time buyers can secure a mortgage with a 5% deposit, but lender choices are more limited. Some government schemes or developer discounts can help increase your effective deposit.
Yes, some lenders accept a 5% deposit for new-build houses, but flats typically require a larger deposit. Mortgage options are more restricted at this level.
Yes, self-employed buyers can access 5% deposit mortgages, but lenders will assess income differently. You’ll need at least two years of tax returns or accounts to prove earnings.
Yes, a 10% deposit is generally more acceptable to lenders than a 5% deposit. There are more mortgage options available for houses, and some developer discounts could help boost your deposit to 15% or more, improving affordability and interest rates.
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