5% builders deposit???

bear.1973

can someone help clear this upfor me.

1) new build @ £158,000 developer will include 5% deposit bringing it down to 150,100, i have a 10% deposit of the 150,000 (15000)
making in total a 15% deposit.

2) The developer has said they can either sell us the property at 150,000 without deposit, and we have to find our own. or they will sell fro 158,000 and include 5% deposit.

As i have only 15000 savings, i thought i may be best to go with option 1 to enable me to get a better LTV but some banks will not recognise a builders deposit, why is that?
could the builder not pay me direct the 5% to add to my 10% and then i could put this down and not involve builder??? still leaving me with a 15% deposit??? Dose this tend to happen??

Cannon_Fodder

£158,000 - 15% is £134300, so for a full 15% deposit/85% LTV, you need £15,800 to add to their £7,900.

If priced at £150,000, then your £15,000 is obviously a 90% mortgage. A worse rate, but you don't have to find the £800...

Is it a house or a flat - you might find trouble getting a mortgage for new build flats at 90%.

Lenders don't always recognise the "gifted" deposit, as they seem to think the developers are artifically maintaining high prices on properties that are likely to be in negatively equity as soon as contracts are exchanged.

Better for the market and society in general for prices to be "real". That's easier said than done when someone bandies around "£5k off!", as though they are doing everyone a favour in helping their LTV...

Don't forget to budget for solicitors fees, moving costs, phone line installation, etc etc etc

kaa_3

I have been in exact the same situation as you are now. Builder has offered 5% gifted deposit and some other goodies (appliances etc), to good to be true i thought, jumping with joy.
The facts are if you are taking gifted deposit you most probably will be recommended to use "builders" mortgage brokers and solicitors as a deal has to be exchanged in 1 months.
Some lenders are not dealing with gifted deposit schems as they see this product as a high risk category because prices set by the builder are higher than the real marked value of the property.
I had 70% LTV mortgage offer from my bank, good rates, but at the end they have refused as soon as i have mentioned "gifted deposit" deal.
For some it migh be a good chance to add 5% to their deposit but for others its a huge disadvantage as you are limiting yourself to a number of lenders.
In my case the builder was not prepared to reduce sale price by 5%, so at the end they have lost a potential buyer.
Do a search on the topic "gifted deposit" and you should have a clearer picture.

kaa

ILW

When a builder offers a gifted deposit, they have just added it onto the selling price. Most BSs know this and will reduce their valuation accordingly.

payless

2) The developer has said they can either sell us the property at 150,000 without deposit, and we have to find our own. or they will sell fro 158,000 and include 5% deposit.

In reality this was always an abuse of system ( not blaming you- rather the builder & lender) but by giving you the option I would say its bordering on fraud

gastroboy

If you want a mortgage on the property, most banks treat the builders "deposit"as a discount to the purchase price. So your 10% (£15k) is just that...10% of the £150k sale price. Be carefull with new builds as well as banks now want 20-25% deposit on the actual price (the price less the "deposit").

figgles

Is £158K the list price? I'm completing soon on a new build and got 20% off the list price by some negotiating and the valuation coming in low too which helped, plus I'd already got my mortgage sorted out with my existing lender so had no hassle.

bear.1973

thanks for the above advice from you all

in answer to some of your questions.
It is a new build house
Was listed at £179.950, without any negotiation at all they offered £ 150-158 depending on if we took their 5% deposit.

I think this makes it approx 20% discounted off listed price, on whichever deal we choose.

Is this a good deal or should i go for more in terms of incentives rather than anymore money off?
they said they shouldnt have a problem with valuers as they sold one not so long ago and it flew thought at £152.000.
any thoughts on this??

Trying_to_be_good

They offered £150-£158 without negotiation - so that's only a starting point.

Now you start negotiating - another £20k off that would be nice. Sticking to a 'clean' price (i.e. no gifted deposit) is the easiest way to go.

bear.1973

well it was very little negotiation, they realised we were interested and said "we have a stock property that we could do for about 152,000 mark"
but she would have to ask her boss. We told her our max budget was £140.000. she then confirmed that they would defo sell it for 150,100 inc 5%deposit, tried to negotiate towards the 140 mark but she was having none of it, sed thats the best she could do and didnt get back to us. She said the problem would be that it would under value the house and cause problems with valuers when they wanted to sell more properties for higher price at the same spec. is this true??? or should i ask to speak to her boss to thrash out a deal?? coz she just wont budge now.

Trying_to_be_good

I guess there's some truth to what she's saying in terms of future valuations, but the house is only worth what the valuer says and what you'll pay for it.

Some think prices are starting to rise, some think they're still falling. I would try to get more off the price than you have so far, whether that's through her or trying to get to her boss. But if your heart's set on the property, logic takes second place to the desire to have it (whatever the cost).