New build BTL mortgage restrictions
- Houses: most BTL lenders cap new build at 75% LTV — standard for BTL; some apply 70-75% cap
- Flats: typically 65-70% LTV (30-35% deposit) — more restrictive than houses; some lenders exclude new build flats in high-supply postcodes
- Developer incentives: disclosed incentives >5% of purchase price are deducted from purchase price for LTV — failure to disclose is mortgage fraud
- Valuation risk: off-plan valuation may differ at practical completion if values fall — lender may refuse at lower valuation
- ICR: valuer's rental estimate used for interest coverage ratio, not developer's rental projections — may differ
Completion risk and off-plan buying
- Longstop date in reservation agreement: typically 6-12 months beyond expected completion — if missed, buyer can rescind and recover deposit
- Mortgage offer expiry: BTL offers last 3-6 months (some extended for new build) — delayed completion may require reapplication at different rates
- Price risk: exchange locks in price; if values fall before completion (12-24 months later), landlord must complete at agreed price
- Practical completion: landlord has ~14 days to legally complete; arrange snagging survey immediately before/at handover
- Developer rental guarantees: often funded from purchase price (pre-paid rent) and may be from shell company with limited recourse — treat with caution
EPC A and B — compliance advantage
Zero MEES spend until 2030+
A new build with EPC A or B is ahead of the proposed 2030 EPC C minimum standard for all new lettings — avoiding the retrofit costs that older stock landlords will need to incur.
- Current MEES minimum: EPC E — all new build comfortably exceeds this threshold
- Proposed EPC C by 2030 (new lettings): new build EPC A/B meets this standard from day one
- Green mortgages: 0.05-0.15% rate discount available from some lenders for EPC A/B properties
- Tenant demand: increasing energy bill awareness makes EPC A/B an increasingly marketable attribute
NHBC Buildmark warranty and snagging
- Years 1-2 (builder's guarantee): developer remedies all notified defects — arrange professional snagging survey before completion
- Years 3-10 (NHBC structural insurance): covers major structural defects (foundation failure, subsidence) — not cosmetic defects
- Alternative warranties: LABC, Premier Guarantee, Global — confirm warranty is on lender's accepted list before exchange
- New Homes Ombudsman Service (NHOS): available for registered builders from January 2022 — complaints escalation route beyond NHBC
- Warranty transfers automatically to subsequent owners — buy-to-let landlord is warranty holder during tenant occupation
New build premium and yield
- New build premium: 10-25% above second-hand equivalent resale value — depresses rental yield on purchase price
- Immediate depreciation: once occupied, resale value falls toward second-hand market; capital loss risk on short hold
- Leasehold considerations: most new build flats are leasehold — check lease length (typically 250 years), ground rent (peppercorn post-June 2022), and service charge structure