These are also known as a builder’s gift deposit, and often a new-build developer will match any personal deposit provided up to 5%, meaning you could get a 10% deposit for a new-build home by only providing a 5% deposit yourself.
How does it work?
You provide a personal deposit of up to 5%, and a builder will match it to a maximum of 5%.
Most lenders are happy to accept this level of deposit, but if you have no personal stake in a property, lenders will see you as a high risk applicant.
If you are able to put in a higher deposit, you will have access to a wider range of products, and increase your chances of being accepted.
Since the credit crunch, some lenders have introduced new rules, which could see the value of the builder’s deposit deducted from the size of a mortgage they are willing to offer.
What’s the catch?
It can be slightly more difficult to obtain a mortgage this way, as the purchase price may not reflect the true market value of the property.
As such, lenders can be hesitant to offer builder deposit mortgages.
However, don’t be put off.
If you have access to a wide panel of lenders via an expert mortgage broker, this issue is negated due to being able to shop around to get the most appropriate deal.
For advice on getting a builder deposit mortgage, speak to one of our expert advisers who will be able to help you with the next steps.