Mortgages are available for all types of property, including new-builds.

Some mainstream lenders shy away from this side of the market, in which case your best bet is to use a mortgage provider who is experienced in new-build properties.

Buy to let new homes offer a range of benefits to investment landlords:

• They are energy-efficient and cheaper to run.
• There is less maintenance work required.
• Most properties won't require any development or refurbishments.
• They can immediately start generating rental income.

Some investors purchase buy-to-let properties off-plan. That means buying from the developer or the builder before the property has finished being built.

This option can be cost-effective, since the property may increase in value in the time between the investment and the building work being finished, and also because many developers offer discounts.

They have the benefit of having an upfront investment to cover some of the construction costs, and the landlord often receives a discount of up to 5%.

However, there are risks to buying off-plan, since the development won't have yet been completed and you are dependent on the construction finishing on time, and being to the quality expected.

There is also the potential that property prices could dip before the building work has completed.

The main difference between a standard buy-to-let mortgage and one against a new-build property is which lender you approach.

 

Specialist lenders offer more attractive rates and are more likely to be able to provide a mortgage against this sort of investment.

Many new-build BTL mortgages have a higher deposit requirement, with around 35% being the average. This compares to a standard buy-to-let mortgage deposit of approximately 15% as a minimum.

Some lenders in this sector prefer to lend to borrowers who have experience as a professional landlord since this reduces their risk.

That doesn't mean to say that a new investment landlord cannot buy a new-build rental property, but that it is essential to work with a specialist mortgage broker who can advise on the most suitable lenders for your borrowing requirements.

Every mortgage lender has to assess affordability before they can offer you a mortgage, and for new-builds, this works just like for any other property investment.

 

The affordability assessment looks at how much rental income the new-build is expected to generate, and therefore how viable the investment is.

Most lenders will look for a projected rental income of between 125-140% of the monthly mortgage payments.

Some lenders also have minimum income requirements, whereby they only consider applications from landlords who can demonstrate a personal income level of at least £25,000 per annum.

There are a few differences in buy-to-let mortgages for new-builds, mainly that you'll usually need a higher deposit and that you are best working with a lender who has experience in this part of the property market.

 

You'll also find that the usual eligibility criteria apply, which vary between lenders.

Factors they will consider include:

• Whether you have a bad credit history.
• If you are retired or working full time.
• Whether you work for an employer or are self-employed.
• If the new build property is non-standard in any way.

If any of these apply, give Revolution Brokers a call. It is always possible to secure mortgage lending, but it is essential to apply to the right lenders who are comfortable offering lending where unusual circumstances apply.

A lot of new-build developments consist of multiple residential properties, in the form of apartments or flats. The key consideration when determining if your investment is worthwhile is looking at long-term rental yields and the stability of the rental market in your chosen area.

 

Some new-builds might be constructed in areas where housing for low-income tenants is in high demand, in which case you wouldn't expect to receive a high rental income.

Indeed, sometimes new-build rental yields can be as low as 3-4%, which makes them less attractive as a buy-to-let investment property.

It is vital to understand the figures involved, to make sure that your rental income covers:

• Running costs
• Maintenance fees
• Mortgage interest
• Letting agent charges

Typically, new-builds don't appreciate faster than any other property.

 

Sometimes a developer might offer an incredibly low price to attract investors, in which case you will see the value of your investment property multiply once the construction is complete.

However, most properties appreciate slowly and gradually over time.

It's also worth bearing in mind that a new-build won't remain 'new' for long, and therefore will rapidly become an established property without the selling point of being newly constructed.

While it is unlikely to depreciate quickly, it is vital that you ensure you are buying for a reasonable price, and that the investment is profitable long-term.