Builder discounts used as deposit?

abmt

Hi! Does anybody know if it is possible to arrange with the builder and lender to use property discounts as "paid deposit"? The situation is we do not have at the moment enough money to give a substantial deposit, and thought that perhaps instead of taking the discounts which we have negotiated, we should leave the price as the list price and have the lender use that money as part of our deposit.

Is it possible/legal?

Please don't kill me for the beginners question!!

Cheers!

VIGILANT22

No chance.........

Annisele

I agree entirely with Vigilant22 - no chance at all I'm afraid.

It used to be possible to do just as you suggest; there is nothing actually illegal about it so long as you tell the lender the true position and don't make up any stories about getting gifts from your parents. However, not surprisingly post-crunch lenders have decided that it's a bad idea.

If the market was rising fast, the lender might say: the property is on the market for £100k but the builder is offering to pay a £5k deposit, meaning that the property is only really worth £95k right now. However, the property is likely to rise in value fast, next year it really will be worth £100k and the year after maybe £105k, so my investment (as a lender) is relatively safe.

Now they say: this is a new build, and the builder might not be able to sell all of the properties at all. As time goes on, if he can't sell his properties the builder might get into financial difficulties and need to sell at almost any price in order to survive. The builder is then going to have to increase the discount he offers - so in a couple of months time, that £100k property with a £5k discount might be sat next to an identical property that's on the market for only £85k - meaning that I (as lender) have just lent £95k on a property worth £85k.

You might say that the first scenario is unrealistically optimistic, the second is unrealistically pessimistic, and that if properties were only £100k you wouldn't have a problem in the first place - but it might give you an idea.

switched_off

Paid deposit, no.

5% yes. You can take a discount as a deposit contribution with the Halifax. However, it has to be a true discount. However, you wont get a new build mortgage with 5% alone, you will need at least another 15% to reach their 20% minimum.

Pincher

So if the lender repossesses the property, and comes to sell it, all they have to do is say abmt told us it's worth this much, so you should pay that much.:T

switched_off

Very helpful.

Pincher

switched_off wrote: »

Very helpful.

Actually, what I said points out the fact that the lender is only interested in what security they have, not an essay in what the borrower thinks it's worth, which saves a lot of time for the borrower. Well, maybe the essay has a therapeutic value, which is cathartic.

switched_off

I was being serious.

VIGILANT22

switched_off wrote: »

I was been serious.

switched off you're switched off! (being)........

switched_off

VIGILANT22 wrote: »

switched off you're switched off! (being)........

You know, I did have to look twice...