A common question we encounter is whether to buy a new build or an existing home. While both options have their merits, the mortgage landscape can look quite different depending on your choice. Let’s dive into the key differences and what they mean for your home-buying journey.
New Build Benefits and Mortgage Options
Help to Buy (HTB) Scheme
One of the biggest advantages of choosing a new build is access to the Help to Buy incentive. This scheme offers first-time buyers a tax refund of up to €30,000 or 10% of the property’s value, whichever is lower. This can significantly reduce the deposit you need to save, making new builds an attractive option for many first-time buyers.
First Home Scheme (FHS)
A government-backed initiative designed to help first-time buyers and eligible homebuyers bridge the financial gap when purchasing a new-build home. The scheme provides an equity stake in the property, meaning the government contribute up to 30% (or 20% if using the Help-to-Buy scheme) of the home’s price in exchange for shared ownership. Buyers can repay this stake over time but are not required to make regular repayments. The scheme aims to make homeownership more accessible by reducing upfront costs.
*NOTE: the first home scheme can be used if a tenant is/has been evicted by a landlord and then buys the previously rented property from the landlord
Lower Deposit Requirements
When purchasing a new build, you might benefit from:
– First-time buyers need a 10% deposit
– The Help to Buy scheme can contribute towards this deposit
– Some developers offer stage payments, which can make the process more manageable
Better Energy Ratings
New builds typically come with superior BER ratings (usually A2 or A3), which can unlock:
– Access to green mortgages with lower interest rates
– Reduced energy bills
– Higher property value retention
Existing Home Mortgage Considerations
Standard Deposit Requirements
For existing homes, the deposit requirements are:
– 10% for first-time buyers
– 10% for second-time buyers
– No access to Help to Buy scheme
Purchase Price Negotiation
Unlike new builds, existing homes often offer:
– More room for price negotiation
– Potentially lower purchase prices in established areas
– Opportunity to factor renovation costs into your mortgage
Mortgage Application Process Differences
New Builds
– Longer drawdown timeline due to construction schedules
– Stage payments may be required
– Valuation process is based on plans and specifications
– Developer’s track record may influence bank decisions
Existing Homes
– Faster completion process
– One-time drawdown
– Immediate valuation possible
– Property condition affects lending decisions
Interest Rate Considerations
New Builds
– Access to green mortgage rates
– More competitive rates due to lower risk assessment
– Special developer-linked mortgage offers
Existing Homes
– Standard mortgage rates apply
– Possibility of higher rates for properties needing renovation
– Renovation mortgage options available
Making Your Decision
Consider these factors when choosing between a new build and an existing home:
Financial Considerations
– Calculate the total cost including all available incentives
– Factor in energy savings from better BER ratings
– Consider the long-term maintenance costs
– Include renovation costs for existing properties
Timeline Considerations
– New builds may have longer wait times
– Existing homes offer immediate occupation
– Factor in renovation time for existing properties
Risk Assessment
– New builds come with structural guarantees
– Existing homes may need surveys and repairs
– Developer reputation matters for new builds
Conclusion
The choice between a new build and an existing home significantly impacts your mortgage options. New builds offer attractive incentives and potentially lower interest rates but require patience during the construction phase. Existing homes provide immediate occupation and potential negotiation opportunities but may come with higher deposits and standard interest rates.
Before making your decision, consult with a mortgage advisor who can provide personalised mortgage advice based on your specific circumstances. They can help you navigate the various schemes and options available, ensuring you make the best choice for your financial situation.