FTB - 5% Deposit "Paid" By New Build Offer

CheekyLittleMonkey

Just wondered if anybody had some advice for my OH who is a FTB. He's looking at buying a new build apartment whereby one of the incentives the Builder is throwing in is the 5% Deposit Paid. Now that in itself seems pretty straight forward and self explanitory. He has received a few 'Key Facts Illustration' packs from different lenders and decided that yes, he does want to pursue the purchase through this particular lender.

The problem that we need help on or rather explaining to us in laymans terms is that the lender has now said that he also has to put down a 5% deposit from his side on top of the 5% deposit offered by the builders. Is this correct/standard procedure? I thought that if you are going for a 95% mortgage then either you pay the 5% deposit or you can go for one of these deals (like I mentioned above whereby the builder is offering to pay the 5% deposit) and NOT 5% coming from either party thus making this into a total of 10%?

Very confused. Any advice would be most appreciated. Thanks.

bylromarha

We bought our house a few years ago where the builder paid our 5% deposit. The mortgage company, northern rock, had no problem with that at all.

It may be a clause specific to your mortgage company, or it may have become general practice across the board due to the hike in prices, becuase if you think about it, what is actually happening is that the house is costing less and OH will be getting a 100% mortgage.

If I were you I would

a) repost this question on the mortgage forum to see if anyone over there can help.
b) give london and country a ring (if you haven't already used them) and ask for their best deal which doesn't have this clause in, if finding the 5% will be a problem.

AndrewSmith

These days it is quite standard for mortgage companies to want a 5% minimum input from the buyer as well.

This is because it is correct that there is actually no deposit at all changing hands, the developer simply increases the asking price of the property to cover it. Lenders are aware of this these days and, as correctly stated above, the reality is that you are getting a 100% mortgage.

That said, there are some lenders out there that will accept it but it is dependant upon your situation and circumstances.

Find a local broker to you via personal recommendation who will sit with you and explain the process, and who will accept this type of situation.

Hope this helps

Andy

distilled

Andy is right but it doesn't help FTB's trying to get a foothold. We do all we can to help, and if I may disagree slightly with Andy, we are quite prepared to drop a price below the "comfort zone" in order to secure a sale.

On a further note, I always insist on a deposit on exchange, however small, which is given as an allowance on completion.

Good luck to you

CheekyLittleMonkey

Thanks guys although I am still a little bit in the grey zone.

The lender in question was HSBC.
The costs from HSBC:
399 if the application is approved
120 for the survey
The builder is giving 500 towards solicitors fees
& also 5% deposit saved.

Now he has KPI's of a few others including Northern Rock.
As he is a first time buyer with no savings to put down as a deposit, hence the reason he has been looking around solely at these deals all the new builds are offering, and obviously, showing further interest in the ones that say 5% deposit paid.

Are there any lenders out there who do just this and don't expect a further 5%?
Is this new legislation regarding mortgages because I never heard of this 10yrs ago.

Thanks for your wise advice. It's nice to know one can just 'ask'.
This sites cool.

jodyapple

I work in the new build industry and to be honest the 5% deposit paid is old news as far as attracting FTBs. There is a lot of competition out there and at the end of the day, the teams selling the houses are sales teams with targets to meet and a head office breathing down their neck to meet them. So as a result - often they have a lot more up their sleeve to offer than simply 5% deposit paid to attract sales. I would be cheeky and see if they will stump up the 10% the mortgage is asking for and then work your way down to free fixtures and fittings seeing what you can get out of them.

Northern Rock do a really good FTB deal - but in the long term it may not be the best way to purchase. They will lend you over the amount you need for deposit and enough for fees. My friend has just bought a house this way and it seems to suit her.

I'm exactly the same position as your OH - but after reading the details of Housepricecrash.com have decided to save for 12 months and then look at it again with a bit more cash to play with.

I hope it works out for you both though :j