Advice needed on buying.

Guitario

Wife and I are FTB's and we have paid £500 to reserve a new build, got it for slightly lower than an equivalent lived- my wife and I are delighted with the deal and look forward to many happy years and giving our kids a bedroom each:j . We must finalise by the 12th Dec.

We were advised by an FA recommended by the house builder peeps that our 10% deposit would not get us very far because it's a new build and the LTV would need to be 85% in order to get it through, but he could assist by arranging a vendor gift of 5% on a higher price to make it all add up.

I called round a few main street banks and went to see an independnt FA and found that this was mostly the case, the independant said we should actually push for the gifted as a 15% deposit would open up better deals. Halifax and a small regional building society said that 10% on a new build was fine with them and were keen to get the ball rolling.

When I asked the builder affiliated FA about the Haifax saying yes to 10%, he said that there are loads of companies who will say yes all day long but the reality is it just won't reach completion. I thought that this may be the case so asked him to go for it on getting an agreement in principle. He came back with the Halifax at 3 yrs @ 6.99% (lets arrange now and when rates lower in the next two weeks and we can switch to the lower rate deal).

Hmm, leaves me feeling a little concerned as thats not a very good rate, what happened to my 15% letting me get the better deals?

Anyway, he came back and said that I had been refused and it would have to be 20% deposit to push through but he could arrange a loan to cover the remainder. It failed because I don't have very much credit history, just 1 CC and 1 store card, both used and paid in full each month. I have no missed payments, no CCJ or defaults, all very squeaky clean and I pay a monthly charge to keep tracks on my report... but not enough to push through at 15% deposit.

I spoke to the Independant FA and she said it was a bit iffy in that you either suceed or fail in an application, there is no middle like no unless you can make it 20%.

Any advice? Really do want to get the property.

Also, does me simply trying other lenders and having more checks on my report make it harder to get a yes? The Builders FA says it does not?

Thanks for reading!!

Guitario

Anyone at all at all at all?

JayZed

Guitario, this FA recommended by the housebuilder sounds dodgy as hell. I really, really don't like the sound of this loan that he's trying to push on you. And the suggestion that the mortgage application failed because you don't have enough of a credit history doesn't sound right to me. And repeated mortgage applications will have an adverse impact on your credit score. And 6.99% is a ridiculously high rate now, even with a (relatively) small deposit.

(It is true, however, that a 10% deposit isn't going to get you far on a new build. Lenders know that new builds are overvalued and these days generally want at least 15% before they'll even consider lending on one).

Please be very, very wary of this FA - he's giving you bad advice (not surprising if he has a connection to the builder). Don't let him steamroller you into anything. Do listen to what the IFA has to say, though.

Guitario

Thanks JayZed!

wymondham

Sounds like you may have just had a narrow escape!

pinkshoes

A deposit is money that you physically have YOURSELF, which is not borrowed. DO NOT take out a loan to pay a deposit!

Arrange your own finances independently, and don't use anyone suggested by the builder. If they're asking for 15% or 20%, then you'll need to find that amount in cash.

How much is the property, and how much do you have in savings? What's your joint salary?

poppysarah

Tell them to reduce the price until your 10% deposit is 15% of the price.
Or better 20%

New build =overpriced.

SandC

Agree with all the above but another part that sends alarm bells ringing in my ears is this builder's FA "He came back with the Halifax at 3 yrs @ 6.99% (lets arrange now and when rates lower in the next two weeks and we can switch to the lower rate deal)."

If you are going for this then you must arrange something that suits. You can't just wait two weeks and then rearrange when rates lower!!

It sounds like they are desperate to sell. I would play hard ball if you really want the property and negotiate a very big reduction. It's a buyers market, don't let them think you are doing a favour, and don't get lulled by talk of gifting of deposits but the value being higher.

If you don't have a deposit then I would consider losing the £500 you put down and saving like hell for the next opportunity.

BigBumpaGirl

Guitario, I was in a similar situation to you in that I had found a new build that I was interested in a while back. I was very close to putting down a deposit to reserve a plot but pulled out at the last minute due to being offered a ridiculously high rate. I had a 5% deposit and the builder was going to put in an additional 5%. Halifax was also recommended to me by a broker, however after a couple of weeks shopping around I realised I could get a much better rate by saving up a bigger deposit. If I was you I would pull out, write off the £500, and start saving for a larger deposit to give you access to a number of other lenders.
Good luck.

Guapito

I'm currently in a similar situation.

We're looking to buy a 4bed semi with George Wimpey at £299'995. They initailly offered us a discount of 50k and a 5k gift for the deposit as we were short of the 10%. We were quite happy to go ahead until I spoke to the recommended IFA and he told us that the best available mortagage for us at that moment was with the Halifax at 7.2% fixed for 5 years(!). He said that as it was a new-build and that we only had a 10% deposit, interest rates aren't as favourable as for an older home. Of course we pulled out as paying an extra £300 or more a month above the average was a no-no, especially as we have a baby on the way. I had a look around for a better deal as initially I thought he was pulling a fast one, but no the Halifax deal was the only one with the exception of RBS which was even worse.

I popped back into Wimpey and after much discussion, they wouldn't budge when it came to a bigger discount, they offered me the following:

If we bought the house for £260k and they pay a 25% deposit which we would pay back over 10 years interest free. This deal would would leave us to mortgage the house at reduced 4.99% fixed rate on just under £200k.
We can payback the 25% anytime over the 10 years, either remortgaging, paying it off when we eventually sell or simply putting money by each month. Now it seems like a good deal to me as we can choose when we want to put money by which is important to us as we are starting a family and it's a big house with decent sized rooms, plus we get to keep our 20k which can be used towards baby stuff, decorating, etc if not pay back some of the loan.
I know paying off the interest-free loan maybe a burden as such, but we intend to stay put for at least 7 or 8 years (if not more), we'll be earning better money and we can always remortage if we want to. My wife is not too sure because of the loan but I'm pretty happy about it.

pinkshoes

Guapito wrote: »

I know paying off the interest-free loan maybe a burden as such, but we intend to stay put for at least 7 or 8 years (if not more), we'll be earning better money and we can always remortage if we want to. My wife is not too sure because of the loan but I'm pretty happy about it.

I'd say if you haven't got the 10% deposit plus £1000 solicitors fees, £2500 stamp duty, and £1000 moving costs in CASH, then you're not ready to be buying, and should save up some more.

You should never pay a deposit out of a loan.