What incentives do developers offer?
Common incentives include contributions towards stamp duty, legal fees, or furniture packages. Some developers offer upgraded kitchens, flooring, or appliances as part of the deal. Others may pay your mortgage payments for the first year or contribute to your deposit.
The value and type of incentive vary between developers and developments. In slower markets, incentives tend to be more generous as developers compete for buyers. Always get the full incentive package in writing before you exchange contracts.
Some developers work with preferred mortgage brokers or lenders and may offer exclusive rates or deals. While these can be genuinely competitive, always compare them against independent advice to make sure you are getting the best overall deal.
How do incentives affect your mortgage?
Lenders require developers to declare all incentives, and most have limits on the total value they will accept. The standard industry threshold is 5% of the purchase price for properties with an LTV above 75%. If incentives exceed this limit, the lender may reduce the property valuation by the excess amount.
For example, if you are buying a £300,000 property and the developer offers £20,000 in incentives (6.7%), a lender may value the property at £295,000 instead. This reduces the amount you can borrow and may mean you need a larger cash deposit.
Gifted deposits, where the developer provides part of your deposit, are treated more cautiously. Not all lenders accept them, and those that do may require you to contribute a minimum amount from your own funds.
Getting the best deal on a new build
Negotiate. Developers expect it, and there is almost always room to improve the initial offer, whether that is a lower price, additional incentives, or upgraded specifications. Having a mortgage agreement in principle strengthens your negotiating position.
Consider what incentives are most valuable to you. A stamp duty contribution saves you real cash, whereas a free kitchen upgrade only matters if it is something you would have paid for anyway. Focus on incentives that reduce your actual costs rather than inflating the perceived value of the package.
Work with a broker who understands how different lenders treat incentives. The wrong combination of price and incentives can inadvertently reduce your borrowing capacity, while the right structure can maximise what you receive without affecting your mortgage.