Buyers getting around the 100% problem with vendors cashbacks

silvercar

Thrugelmir wrote: »

So how are buyers managing to exchange contracts without finding a say 10% deposit?

Seller says, "I'll sell you my home for 110k but I'll give you a 10k reward for you to use as a deposit."

Buyer gets a mortgage for 100k on a property "valued" at 110k including the 10k deposit.

tyllwyd

Conrad wrote: »

Just wanted to report I'm getting frequent cases now where vendors notionally give the buyer a cashback, although no money changes hands. Some lenders such as Halifax are quite happy as long as the LTV based on the open manrket value does not exceed 90%.

I could have sworn that when one time when I moved house (probably in about 1998) someone in the chain was going to get cashback on his mortgage and wanted to use that cashback as his deposit. I'm not sure if he managed to do it though, but the chain completed so I always assumed he did.

Sir_Humphrey

Can someone explain to me how this is not mortgage fraud?

JayScottGreenspan

Conrad wrote: »

Another change to throw into the pot.

Just wanted to report I'm getting frequent cases now where vendors notionally give the buyer a cashback, although no money changes hands. Some lenders such as Halifax are quite happy as long as the LTV based on the open manrket value does not exceed 90%.

Hitherto, the two parties had to be blood relatives, but this stipulation has been removed.

This effectively means FTBs are once again buying without physical deposits.

I think this is another example of the issue I have with classical economics, which, is merely a patchwork of things past. It simply fails on many counts to spot the all important new trends.

So you buy a house for £180k and everyone just pretends its open market value is £200k for the purpose of getting a mortgage?

And HBOS are doing this now? If you can prove this you could probably get a fair chunk of cash from one of the red tops...

Conrad

Thrugelmir wrote: »

So how are buyers managing to exchange contracts without finding a say 10% deposit?

The same way they used to exchange with a 100% mortgage and no deposit. There is no legal requirment for money to change hands at excahnge as long as the sellers are ok.

Conrad

Sir_Humphrey wrote: »

Can someone explain to me how this is not mortgage fraud?

Goor blimey Guvnur, you kids are far to clevver for us, you better take me in to the nick.

If it is fraud, it's Halifax fraud - they came up with the scheme and thier own local regional manager gave me the details!


Vendors true and verifiable value = £150k (verified by the lenders own valuer)

Buyer prepared to pay that, but has no deposit.

Halifax will lend 90% of value (not price), or £135000

Seller ends up with £135k


Of course not every seller will want to offer this, but in a market with few buyers I suspect plenty will.

geri1965_2

I was offered this kind of mortgage when I bought my house in 1997. I didn't really like the sound of it though so I opted for a straight 100% mortgage.

JayScottGreenspan

Conrad wrote: »

Goor blimey Guvnur, you kids are far to clevver for us, you better take me in to the nick.

If it is fraud, it's Halifax fraud - they came up with the scheme and thier own local regional manager gave me the details!


Vendors true and verifiable value = £150k (verified by the lenders own valuer)

Buyer prepared to pay that, but has no deposit.

Halifax will lend 90% of value (not price), or £135000

Seller ends up with £135k


Of course not every seller will want to offer this, but in a market with few buyers I suspect plenty will.

Yeah, but the true and verified value is £135k. As determined and verified by the market.

I suppose it's up to HBOS if they want to pretend the value is £150k. But it isn't.

Sir_Humphrey

Conrad wrote: »

Goor blimey Guvnur, you kids are far to clevver for us, you better take me in to the nick.

If it is fraud, it's Halifax fraud - they came up with the scheme and thier own local regional manager gave me the details!

Taking out a mortgage on a false valuation sounds pretty fraudulent to me. It seems that HBOS are happy to defraud themselves. You'd have thought they'd sacked their risk control manager or something, wouldn't you!

Conrad

Uber pessimist classical economists as ever fail to factor in Human ingenuity.
Self cert may be restricted for now, but long long before self cert people found other ways.
A builder I know of boasts he has done about 50 employment refs over the years, yet only 2 people work for him!

Again it's the Adam Haart Davis Universe co - existing with the White van Man Universe.
The former never pays anyone late, files his Tax return early, thinks the law is far more potent than it really is, would never use cash convertor stores to cash cheques so the ex wife / tax man is kept in the dar.

The latter is a happy go lucky, if the suns shining buy it type, who doesn't really even know what a Tax return is. He has no interest in the economy or Politics - he just ...is.
They pay little attention to societal rules, afterall they claim, all those Government ministers have thier faces in the expenses and after dinner speech / book writing trough - they are using thier advantages and white van man thinks he should use his.