Video Transcript

Well, this will purely depend upon the lender’s instructions. As you might expect, a new build premium is a premium applied to brand new buildings, particularly owner-occupied residential properties, and is a higher rate that a buyer may be prepared to pay to be the first occupier of that property, compared to an older or a second-hand equivalent. If you think of a new housing development, brand new homes can have a greater appeal than an older house and attract a higher value. Some lenders, mainly high street mortgage providers, will want the value as is but will want detail on the incentives offered by the developer to secure the purchase, and this is a fairly well-defined process.

It’s a simple way of de-risking the loan for lenders.

In the specialist or bridging sector of the market, many lenders specifically instruct valuers to ignore any new build premium, and value the property as if it was second-hand or had been lived in previously. So, the comparables used will be modern, but second-hand equivalents. The rationale for lenders is quite simple in that whilst their customer may be buying the property as brand new at the time of the loan, if the customer had to sell the property to repay the loan, or the bank had to appoint and dispose of the property, it will no longer be brand new and there won’t be a new build premium. So, for lenders, it’s a simple way of de-risking the loan