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    • Prish
    • By Prish 12th Jun 17, 2:38 PM
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    Prish
    Help to buy equity loan - contract wording
    • #1
    • 12th Jun 17, 2:38 PM
    Help to buy equity loan - contract wording 12th Jun 17 at 2:38 PM
    Hi all,

    I am currently going through the process of purchasing a property with the London help to buy - equity loan scheme.

    The process is now nearing exchange of contracts. I've just got the contract and came across the following wording on page 3:

    "If the deposit actually paid shall be less than 10% of the purchase price then the balance of such 10% shall become payable to the seller on the date fixed for completion whether or not completing does then take place and further such sum shall remain a debt from the buyer to the seller in the event of rescission or failure to complete through no fault of the seller."

    To me, this paragraph doesn't seem right. I mean, doesn't this pretty much say that if for some reason the lender bank pulls out and doesn't want to lend you money for any reason, then you still owe the seller 10% of the purchase value regardless of whether you get the property or not??

    Is this normal to be on the contract?

    Would be great if someone who has had experience with this scheme provide some advise!

    Thanks

    Prish
Page 1
    • Pixie5740
    • By Pixie5740 12th Jun 17, 2:41 PM
    • 10,816 Posts
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    Pixie5740
    • #2
    • 12th Jun 17, 2:41 PM
    • #2
    • 12th Jun 17, 2:41 PM
    That's not down to the HTB scheme that's just how buying property in England works. You pay a deposit and if you exchange but cannot complete the sale you forfeit the deposit and possibly any other expenses your vendor faces because you cannot complete. Ask your solicitor about it.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • Prish
    • By Prish 12th Jun 17, 2:56 PM
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    Prish
    • #3
    • 12th Jun 17, 2:56 PM
    • #3
    • 12th Jun 17, 2:56 PM
    Thank you for the quick response Pixie! Much appreciated. At least that gives me relief that it's normal, just seems pretty risky though since you have no control over if your lender could all of a sudden just decide not to lend you money for any reason.

    Again thank you!

    Have a great day.

    Prish
    • Pixie5740
    • By Pixie5740 12th Jun 17, 3:04 PM
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    Pixie5740
    • #4
    • 12th Jun 17, 3:04 PM
    • #4
    • 12th Jun 17, 3:04 PM
    Try not to give a lender to change their mind then. For example, don't go applying for any more credit between now and completion because I agree that it can be a bit nerve wracking.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • saajan_12
    • By saajan_12 12th Jun 17, 3:05 PM
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    saajan_12
    • #5
    • 12th Jun 17, 3:05 PM
    • #5
    • 12th Jun 17, 3:05 PM
    That is normal. If you fail to complete i.e. don't pay the full funds, you lose 10% of the purchase price (or more if the seller's losses as a result of your breach of the contract exceed the 10%). Usually you just lose the exchange deposit but if your deposit is less than the standard 10%, this is saying you still lose 10%.

    The buyer is considered to fail to complete if they can't raise the funds, even if the underlying cause is (for example)
    *mortgage offer withdrawn/late
    *H2B Equity loan withdrawn/late
    *Buyer loses their job
    *Buyer's bank account gets robbed
    ..
    • Prish
    • By Prish 12th Jun 17, 3:13 PM
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    Prish
    • #6
    • 12th Jun 17, 3:13 PM
    • #6
    • 12th Jun 17, 3:13 PM
    Thanks all. That all makes me feel a little more at ease
    • SuboJvR
    • By SuboJvR 12th Jun 17, 3:13 PM
    • 343 Posts
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    SuboJvR
    • #7
    • 12th Jun 17, 3:13 PM
    • #7
    • 12th Jun 17, 3:13 PM
    In practice, if someone only gave a 5% deposit then how would they be expected to pay the remaining 5%?

    (Talking London pricing in the op's case so will be a significant amount!)
    • Pixie5740
    • By Pixie5740 12th Jun 17, 4:03 PM
    • 10,816 Posts
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    Pixie5740
    • #8
    • 12th Jun 17, 4:03 PM
    • #8
    • 12th Jun 17, 4:03 PM
    In practice, if someone only gave a 5% deposit then how would they be expected to pay the remaining 5%?

    (Talking London pricing in the op's case so will be a significant amount!)
    Originally posted by SuboJvR
    The vendor can take your first born.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • Prish
    • By Prish 12th Jun 17, 4:04 PM
    • 5 Posts
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    Prish
    • #9
    • 12th Jun 17, 4:04 PM
    • #9
    • 12th Jun 17, 4:04 PM
    @suboJvR - i think that would probably be covered by the mortgage then if you did not have the money to cover the remaining 5%.

    so you would have 5% deposit, 40% equity loan , 55% mortgage
    • gingercordial
    • By gingercordial 12th Jun 17, 4:24 PM
    • 982 Posts
    • 940 Thanks
    gingercordial
    In practice, if someone only gave a 5% deposit then how would they be expected to pay the remaining 5%?

    (Talking London pricing in the op's case so will be a significant amount!)
    Originally posted by SuboJvR
    You mean if you've failed to complete and have to come up with the extra 5% yourself to make the 10% owed per the contract?

    The seller could take you to court to claim the money. If you could get a personal loan to settle it, you'd have to do that, or borrow from parents, rob a bank... If all else failed you'd be forced into bankruptcy.
    • SuboJvR
    • By SuboJvR 13th Jun 17, 1:28 PM
    • 343 Posts
    • 238 Thanks
    SuboJvR
    You mean if you've failed to complete and have to come up with the extra 5% yourself to make the 10% owed per the contract?

    The seller could take you to court to claim the money. If you could get a personal loan to settle it, you'd have to do that, or borrow from parents, rob a bank... If all else failed you'd be forced into bankruptcy.
    Originally posted by gingercordial
    Well that all sounds moderately terrifying.

    This house buying lark is so scary. Must keep reminding myself that people do it all the time, and not think about the most unlikely scenarios of things going wrong for reasons outside of our control.

    I guess with Help to Buy, new builds, the sellers ie developer couldn't really claim to have losses that exceed the original 5% deposit one expects as they will still sell the house to another person.
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