Are you a first-time buyer or home mover looking to step onto the property ladder? Navigating the world of new build mortgages can be daunting, especially with so many schemes and options available. However, the Own New Rate Reducer scheme stands out as a revolutionary way to make home buying more affordable. By leveraging developer incentives, this scheme makes it easier and cheaper to buy a new build home. Our comprehensive guide will introduce you to the Own New Rate Reducer scheme, explain its workings, and help you decide if it's the right choice for you.
Understanding the Own New Home Purchase Scheme
The Own New Rate Reducer home purchase scheme is not just another mortgage option. It's a scheme specifically designed to assist potential homeowners in securing more favourable mortgage terms when purchasing a new build property. By collaborating with home builders and lenders, this initiative helps reduce the financial burden on homebuyers, making the dream of owning a new build home more attainable.
How Does the Rate Reducer Work?
The scheme operates by using a developer's contribution to lower your mortgage interest rate for the initial years of your mortgage. When you buy a property through the Own New scheme, the developer agrees to contribute a percentage of your property's purchase price directly to your mortgage lender. This contribution reduces your mortgage interest rate, resulting in lower monthly payments for a set period, typically the first two to five years.
Who Can Benefit from the Scheme?
This innovative scheme is open to a wide range of potential buyers. Whether you're a first-time buyer, a home mover, or someone who has owned property in the past, you can benefit from the Own New Rate Reducer. It’s a flexible option that aims to make home ownership more accessible to a broader audience.
Why Consider the Own New Rate Reducer?
Lower Initial Mortgage Rates
One of the most attractive features of the Own New Rate Reducer is the significantly lower mortgage rates you can access. In some cases, rates can be as low as sub-1%, allowing you to manage your finances more effectively during the early years of home ownership.
Minimal Deposit Requirements
For many prospective buyers, saving for a deposit is a significant hurdle. The Own New Rate Reducer allows you to secure a mortgage with as little as a 5% deposit, easing the financial burden and making it possible to own a home sooner.
Paying Off More Capital
With reduced interest rates, a greater portion of your monthly payments goes towards paying off the capital amount borrowed. This means you are building equity in your home faster than with a traditional mortgage option.
What are the drawbacks?
Limited Property and Lender Options
While the benefits are compelling, the Own New Rate Reducer does come with some limitations. You’ll need to select a property from developers participating in the scheme, which may limit your choices. Similarly, the number of lenders offering mortgages through this scheme is currently limited, although this is expected to expand over time.
Potential for Rate Increases
Once the initial rate reduction period ends, you could face a significant increase in your mortgage payments. It’s essential to plan for this and consider your long-term financial strategy to avoid potential financial strain.
The New Build Premium
Purchasing a new build property often comes with what is known as a 'new build premium'. This means the property might depreciate once you've moved in, especially if you need to sell within a short time frame. It's crucial to weigh this against the benefits of the scheme.
Understanding the Mechanics Own New
Developer Contributions
The key to the Own New Rate Reducer’s appeal lies in the developer's contribution, typically 3% or 5% of the property's purchase price. This contribution is channelled through Own New to your mortgage lender, effectively reducing the interest rate on your loan for a specified period.
Fixed Rate Terms
The scheme offers two fixed-rate terms—two or five years. During this time, your interest rate remains unchanged, providing you with predictable, lower monthly payments.
Eligible Developers and Lenders
Participating Developers
Own New has partnered with several prominent developers to offer this scheme, including Barratt Developments, Persimmon, Taylor Wimpey, Bellway, and Berkeley Homes. These developers offer a wide range of properties, providing potential buyers with various options.
Mortgage Lenders
Not all lenders participate in the Own New Rate Reducer scheme. The scheme now includes options from Virgin Money, Leek Building Society, Darlington Building Society, and Furness Building Society, among others. It's advisable to research and consult with a mortgage broker to understand the best options available to you.
How Do I Apply for the Own New Purchase Scheme
Finding the Right Property
Start by identifying a new build property from a participating developer. Research each developer’s offerings to find a home that fits your needs and budget.
Securing Your Mortgage
Once you’ve selected a property, work with an approved Own New mortgage broker to explore your mortgage options. Brokers like us are familiar with the intricacies of the scheme and can provide valuable guidance.
Completing the Purchase
After securing your mortgage, proceed with the standard new build purchase process. Unlike shared ownership schemes, you will own 100% of your home upon completion.
What are the alternatives to Own New?
While the Own New Rate Reducer offers compelling benefits, it's not the only route to home ownership. Consider alternative schemes such as:
95% Mortgages
These mortgages, supported by the Mortgage Guarantee Scheme, allow you to purchase with a small deposit while offering a wider choice of properties beyond new builds.
Shared Ownership
Although more complex, shared ownership allows you to purchase a share of a property and pay rent on the remaining portion. Evaluate the pros and cons before deciding.
100% Mortgages
Recently launched by Skipton Building Society, these mortgages require no deposit, appealing to first-time buyers with a proven track record of paying rent.
For more information on the various home purchase schemes, visit Which Home Purchase Scheme Is Right For Me?
Conclusion
The Own New Rate Reducer scheme represents an innovative way to make home ownership more accessible for first-time buyers and home movers. With lower initial mortgage rates and minimal deposit requirements, it offers a financially advantageous start to home ownership. However, it's crucial to weigh the potential drawbacks, including limited options and future rate increases. By carefully considering your options and consulting with experts, you can make an informed decision that aligns with your financial goals.
For more information or personalised advice on navigating the Own New scheme, feel free to contact us today. The path to owning your dream home may be more accessible than you think.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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