OwnNew.co.uk - How does the Own New help to buy new build homes work?

Buying a New Build

1 Apr

In a climate where the homeownership seems ever more elusive for many, the introduction of the Own New scheme offers hope. Developed to make purchasing a new build more attainable, this programme stands out for its approach to overcoming two major hurdles faced by prospective buyers: high interest rates and substantial deposit requirements.Own New is not just a mortgage product but a comprehensive scheme designed to facilitate easier access to new build homes. By working closely with home builders and lenders, Own New ensures that buyers can enjoy reduced rates and smaller deposit mortgages, thereby making homeownership a reality for many. The beauty of the scheme lies in its simplicity and effectiveness; by arranging a mortgage with an approved Own New mortgage broker, buyers can choose between two groundbreaking products: Rate Reducer and Deposit Drop, each tailored to address specific financial hurdles.

Own New - Rate Reducer

Are you dreaming of owning a brand new home, but worried about the high cost of mortgages? The Own New Rate Reducer scheme, launched in February 2024, could be the answer you've been waiting for. This innovative program aims to make buying a new build property more affordable by offering significantly lower mortgage rates for the initial term.The essence of the Own New Rate Reducer scheme lies in its collaborative framework, involving property developers, lenders, and the orchestrating company, Own New. This approach aims to alleviate the financial burden on buyers by reducing the interest rate on mortgages. The process unfolds as follows: when a buyer opts for a property participating in the scheme, the developer contributes a certain percentage of the purchase price (either 3% or 5%) towards the buyer's mortgage. This contribution, channelled through Own New to the mortgage lender, enables the lender to offer a reduced interest rate to the buyer. Despite these perks, it's crucial to note that this scheme operates within the confines of traditional mortgages, requiring applicants to undergo the standard mortgage application process, albeit with the added advantage of reduced interest rates thanks to the developer's contribution.

Housebuilder Contribution: When you choose a new build property participating in the scheme, the developer contributes a percentage (either 3% or 5%) of the purchase price towards your mortgage.
Reduced Interest Rate: This contribution from the developer goes directly to your mortgage lender via Own New. It essentially acts as a pre-payment, allowing the lender to offer you a lower interest rate on your mortgage.
Traditional Mortgage: While you benefit from a reduced rate, it's important to remember that this is still a traditional mortgage. You'll go through the usual mortgage application process but with the advantage of a lower interest rate thanks to the developer's contribution.
Lower Monthly Payments: The lower interest rate translates into significantly lower monthly mortgage payments for the initial fixed term of your mortgage (typically 2 or 5 years).

The benefits of this scheme include lower monthly payments during the initial fixed term of the mortgage, which could span 2 or 5 years, thereby providing a much-needed financial reprieve to homeowners in the early years of their mortgage. The scheme affords flexibility regarding deposits, with the introduction of the Deposit Drop program for those who find the accumulation of a large deposit challenging. Additionally, the mandatory use of an Own New-approved mortgage broker can serve as a boon, providing applicants with expert guidance through the complexities of the scheme and aiding in the comparison of mortgage options to enhance the likelihood of application success.

Financial Savings: The most significant benefit is the potential to save thousands of pounds on your monthly mortgage payments compared to what you would pay with a traditional mortgage on the open market. This can free up valuable cash flow during the initial years of your mortgage.
Flexibility with Deposits: Own New offers two schemes: Rate Reducer and Deposit Drop. If a large deposit is a hurdle, you might be better suited for the Deposit Drop program. Discuss both options with your mortgage broker to see which aligns best with your financial situation.
Guidance from Mortgage Brokers: The scheme requires you to use a mortgage broker approved by Own New. This can be a positive step, as a good broker can navigate the complexities of the scheme, compare mortgage options, and increase your chances of a successful application.

However, potential drawbacks warrant careful consideration. The reduced interest rates are only applicable for the initial fixed term, post which there's a possibility of significant rate hikes, especially in a scenario where market rates remain unchanged or increase. Furthermore, the scheme's most enticing rates often necessitate substantial deposits, which may be beyond reach for some applicants. Another limitation is the scheme's restriction to new build properties participating in the program, potentially narrowing the pool of available properties. Additionally, it's important to consider the premium often associated with new build properties, which may depreciate over time, impacting their future resale value.

Future Rate Increases: The lower interest rate applies only for the initial fixed term. After that period ends, your mortgage rate could jump significantly, especially if market rates haven't fallen. Carefully consider your long-term financial planning and be prepared for potentially higher monthly payments in the future.
Larger Deposits for Lowest Rates: The most attractive rates, like the 0.99% mentioned, often require a larger deposit (around 40%). If you don't have a substantial deposit saved, you may not qualify for the lowest rates.
Limited Property Choices: This scheme is restricted to new build properties from developers participating in the program. Your options may be limited compared to the broader housing market.
New Build Considerations: New build properties generally cost more than existing homes and may depreciate in value over time. Factor in these additional considerations when comparing costs and potential resale value.

For those for whom the Own New Rate Reducer scheme may not seem an ideal fit, alternative homeownership initiatives exist, such as the Mortgage Guarantee Scheme, the First Homes Scheme, shared ownership programs, and the Deposit Unlock scheme. Each of these alternatives caters to different aspects of the homeownership challenge, offering solutions ranging from lower deposit requirements to discounted homes for first-time buyers.

Mortgage Guarantee Scheme: This UK government-backed initiative allows first-time buyers to secure a mortgage with just a 5% deposit (available until June 2025).
First Homes Scheme: This scheme in England offers discounted homes specifically for first-time buyers who might otherwise struggle to afford a property.
Shared Ownership: Shared ownership schemes, run by housing associations, allow you to buy a portion of a property and pay rent on the remaining share. This can be a good option for first-time buyers with a limited deposit.
Deposit Unlock: This scheme allows first-time buyers and movers to access 95% mortgages on new build properties, potentially requiring a smaller deposit compared to traditional mortgages.

Deciding whether the Own New Rate Reducer scheme aligns with one's homeownership aspirations necessitates a thorough evaluation of one's financial circumstances, goals, and risk tolerance. Consulting with a qualified mortgage broker can provide invaluable insights, offering a detailed explanation of the scheme, comparisons with other available options, and assistance throughout the mortgage application process. This guidance can be instrumental in securing a deal that best suits the needs of prospective homeowners, paving the way for a more accessible and financially viable path to owning a new home.

Own New - Deposit Drop

The Own New Deposit Drop scheme is a game-changer for aspiring homeowners, particularly those struggling to save a large deposit. Introduced after the conclusion of the Help to Buy scheme, it offers a path to property ownership with a significantly lower upfront cost.The heart of the program lies in its name - Deposit Drop. Unlike traditional mortgages demanding a substantial deposit (often 20% or more), Own New Deposit Drop allows you to purchase a new build property with just a 5% deposit. This significantly reduces the financial barrier for many first-time buyers and those looking to move.Another key feature is the scheme's broader acceptance criteria. Own New looks beyond the typical benchmarks and assesses your ability to make repayments. This means factors like being self-employed, having multiple income sources, past furloughs, or a limited credit history won't necessarily disqualify you, unlike traditional mortgage applications.

Streamlined Process and Benefits

Unlike what one might expect with such relaxed criteria, the Own New Deposit Drop does not entail an unconventional mortgage process. Applicants undergo the standard mortgage application procedure, directly liaising with lenders. This consistency ensures applicants are fully aware of the terms and conditions, offering peace of mind.The program does not compromise on affordability, thanks to the collaboration between Own New and lenders to provide competitive interest rates for these 95% loan-to-value mortgages. This collaboration potentially lowers monthly payments compared to those associated with traditional, high-deposit mortgages, enhancing affordability.Another advantage is the expedited path to homeownership. The necessity of a large deposit often postpones the realisation of owning a home, compelling many to remain in the rental market while they save. The Own New Deposit Drop scheme eliminates this delay, facilitating a quicker transition into a new home.

Standard Mortgage: Despite the relaxed criteria, Own New Deposit Drop doesn't involve unconventional mortgages. You'll still qualify for a standard mortgage, arranged directly with a lender through the usual application process. This provides peace of mind and ensures clarity in terms and conditions.
Competitive Rates: The program doesn't compromise on affordability beyond the low deposit. Own New collaborates with lenders to offer competitive interest rates on these 95% loan-to-value mortgages. This translates to potentially lower monthly payments compared to traditional high-deposit mortgages.
Faster Move-in: Saving for a large deposit can significantly delay your homeownership dreams. Own New Deposit Drop eliminates this obstacle, allowing you to move into your new home much sooner. No more years stuck renting while accumulating a substantial deposit.

Eligibility and Process

The scheme's appeal is its broad target demographic, encompassing not only first-time buyers but also existing homeowners looking to move. It's particularly advantageous for those with lower deposits or those who find meeting traditional lending criteria challenging.The application process is designed to be as straightforward as possible. Interested parties begin by approaching developers participating in the scheme, who then direct them to approved lenders. These lenders assess the applicant's financial situation, determining their eligibility, and guide them through the mortgage application. Once approved, applicants can proceed to purchase their new home, assuming full ownership rights immediately.Notably, there are no additional fees for homebuyers utilising the Own New Deposit Drop. Instead, the scheme is funded by a nominal fee from the developer upon sale completion, allowing lenders to offer competitive mortgages for new builds without imposing extra costs on buyers.

Open to All: The scheme caters to a broad range of buyers. Whether you're a first-time buyer eager to step onto the property ladder or a homeowner looking to upgrade, Own New Deposit Drop can be a viable option. It's particularly beneficial for those with lower deposits or facing challenges with traditional lending criteria.
Simplified Application: The application process is straightforward. You approach your chosen developer participating in the program. They will guide you towards lenders approved by Own New. Based on your financial situation, they will determine your eligibility and guide you through the standard mortgage application process. Once approved, you can move into your brand-new home with ownership rights.
No Cost to Homebuyer: There are no additional fees for buyers using Own New Deposit Drop. The program is funded by a small fee paid by the developer upon completion of the sale. This fee enables lenders to manage risk and offer these competitive low-deposit mortgages on new build properties.

Own New Deposit Drop can be a powerful tool for those aiming to own a brand-new home. With its accessible deposit requirement, flexible criteria, and competitive rates, it streamlines the homebuying journey for many. If you're considering a new build property, exploring the Own New Deposit Drop scheme is highly recommended. Discuss it with participating developers and qualified mortgage brokers to determine if it's the right fit for your financial situation and homeownership goals.

Eligibility and Application

Eligibility for the Own New scheme is broad, encompassing first-time buyers, home movers, and those who have owned property before. The scheme has partnered with a variety of house builders across the UK, ensuring a wide selection of eligible properties. Importantly, the scheme does not currently allow for the combination of Rate Reducer and Deposit Drop, ensuring clarity and simplicity in the choice of financial assistance.Prospective buyers are encouraged to initiate the process by contacting their preferred builder or an approved mortgage broker, who can guide them through the application process and help determine the most suitable product for their needs.The Own New scheme represents a significant step forward in making homeownership more accessible to a broader demographic. With its innovative products, Rate Reducer and Deposit Drop, it offers practical solutions to the challenges of high interest rates and large deposit requirements. For many, Own New could be the key to unlocking the door to their new home, offering not just a place to live, but a foundation for future stability and happiness.

Karen Shaw