Why are new build mortgages difficult to obtain ?
Is this because of the potentially bigger negative equity .... or some other reason ?
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410manzanilla postedI think it is just recognising that these house often drop signifiacntly in value in the first few years - there is a real premium on buying a new house. So 90% LTV may leave the lender with very little cushion, even if house prices in general stay as they are.
manzanilla
Posted on 03 March 2010 |
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272Swarbs posted
Because as soon as you buy a new build house it falls in price, because it stops being 'new'. Even if you sell it six months later, it won't be a new house, you will have lived in it and so it becomes less attractive to the next buyer. Same principle as new cars - as soon as you drive it out of the showroom it loses a large chunk of its value.
In addition, areas where new houses are being built will often experience a temporary level of oversupply - if you build 100 new flats in a part of the town where there are only 1,000 properties available, you push the supply up and increase the risk of prices falling in the near future.
Posted on 03 March 2010 | Love 1 love
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2thefox posted
When you speak to banks about mortgages do they really say is it a new build as a question for credit? I thought they were just interested in your credit/wealth worthiness and amount of capital you require, and how risky you are as an individual?
Posted on 03 March 2010 | Love 0 loves
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804MikeGG1 posted
If there is a new build premium of, say, 10%, which is quite normal, it means that the lender will consider it as a 0% deposit. Their minimum is 10%, so they will be thinking in terms of 20% deposit and applying the 10% interest rate, 25% becomes 15% etc.
It is not just your creditworthiness, it is also what they are likely to get back if you do default.
Mike
Posted on 03 March 2010 | Love 1 love
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272Swarbs posted
thefox, banks are also interested in the property you buy, as this is the collateral for the loan. The bank wants to know both how credit worthy you are, and whether they will be able to recover much of their money at auction if you default and they have to repossess. The second factor is very dependent on the type of property you buy. Hence mortgage terms will often be different for new built, converted properties, tall tower blocks and various other factors
Posted on 03 March 2010 | Love 1 love
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212SoftwareBear posted
thanks guys and gals ... I knew about the new car thing ... just wondered if there was anything else.
Posted on 04 March 2010 | Love 1 love
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