What incentives do developers offer?
You will often see contributions towards stamp duty, legal fees or a furniture package. Some developers throw in an upgraded kitchen, better flooring or new appliances. Others go further and cover your mortgage payments for the first year, or put money towards your deposit.
The size and shape of an incentive changes from one developer and development to the next. When the market slows, incentives tend to grow as developers work harder to attract buyers. Get the full package set down in writing before you exchange contracts.
Some developers have preferred mortgage brokers or lenders and may point you towards exclusive rates. Those deals can be genuinely competitive, but weigh them against independent advice so you know you are getting the best result overall.
How do incentives affect your mortgage?
Lenders make developers declare every incentive, and most set a ceiling on the total they will accept. The usual industry threshold is 5% of the purchase price where the LTV is above 75%. Go past that ceiling and the lender may knock the excess off the valuation.
Say you are buying a £300,000 property and the developer offers £20,000 of incentives (6.7%). A lender might value the home at £295,000 instead. That trims how much you can borrow and can leave you finding a larger cash deposit.
Gifted deposits, where the developer puts up part of your deposit, get a warier reception. Not every lender allows them, and those that do often ask you to add a minimum amount from your own savings.
Getting the best deal on a new build
Do negotiate. Developers expect you to, and there is nearly always give in the opening offer, be it a lower price, extra incentives or a better specification. Turning up with a mortgage agreement in principle puts you in a stronger spot at the table.
Think about which incentives genuinely help you. A stamp duty contribution frees up real cash, while a free kitchen upgrade only counts if it is something you would have bought anyway. Chase the incentives that lower your actual costs, not the ones that just make the package look bigger.
Choose a broker who knows how different lenders read incentives. Get the mix of price and incentives wrong and you can accidentally shrink how much you are able to borrow. Get it right and you keep more of what is on offer without denting the mortgage.