Got your eyes set on a new build home but unsure how to finance it? Choosing the right kind of loan is crucial to ensuring you get the most out of your investment. Plus, there are alternative financing sources, as well as government grants and schemes you could take advantage of, so it’s well worth taking the time to dissect the options available to you.
New build homes have been viewed as part of the solution to the so-called affordable housing crisis in the UK, making them an attractive prospect for many potential buyers. Whether you go for a new home situated in Cambridge, or elsewhere, there are plenty of benefits you can enjoy, from modern designs to spacious interiors.
Traditional financing options
More conventional options when financing new builds include bank loans and mortgages. Both involve an application process. These will typically require a deposit of around 20%, however if the property price is higher, the deposit will be too. Statistics show that in 2022, the average first-time buyer deposit in the UK was around £62,470.
The application will take into account your credit score, credit history and more, as this will help to prove whether someone can afford their monthly loan payments. Interest rates in the UK have been extremely high over the past year, so it’s important to seek advice from a mortgage advisor.
Alternative financing sources
These financial assets don’t fall into the conventional investment categories, such as stocks and cash. Instead, they might include one of the following:
- Private equity: These generally involve buying shares in a private company. This might be done through:
- Private equity firms
- Venture capital funds
- Crowdfunding platforms
- Peer-to-peer lending: When you invest in peer-to-peer lending, this equates to making loans to others using online platforms that connect everybody.
- Real estate: This involves investing in properties and allows you to own a tangible asset that could increase in value, while also creating a source of ongoing cashflow.
Government programs and grants
You should also see whether you can access grants or take advantage of dedicated government programs. For example, you can use a Lifetime Individual Savings Account (LISA) for a property that costs £450,000 or less, however, you can only set this up if you are aged between 18 and 39 years.
If you opened a Help to Buy ISA before November 2019, you can use this for a deposit, so long as you buy before December 2030. Another option is shared ownership, where you buy a share of a home from the landlord – this will likely be the council or a housing association. You then simply pay rent on the remaining share. While government grants are undoubtedly beneficial, make sure you’re aware of any restrictions.
Challenges in financing
As with any situation where you’re seeking finance, you should be diligent about the restrictions and eligibility issues you could face. Make sure you seek professional advice before embarking on any of the above options. You should also review your creditworthiness, as well as your economic circumstances.
