Builders and bank cant agree

reggie01642

We went to buy a new build house 8 weeks ago. We got a pretty good price, a long way off what the same houses were going for two years ago. We arranged the mortgage with Halifax ..The deal was shared equity .. i.e the builder put in 15% towards our deposit and we put in 10% it was approved and everything was going fine until today..

It had been dragging on a while beyond our control as we were waiting for Halifax to transfer the funds.. The builders have been phoning us everyday threatening to pull out as it a long was passed r agreed completion date. Again we couldnt have done anything we could control any more quickly than we did. Anyway we found out today that Halifax are refusing to release the funds because they are unhappy with a clause in the contract which says that they would have to have consent from the builderto reposess the house should they want to do so .. So basically the two companies are at logger heads over this ..

It is really frustrating bearing in mind they do most of their shared equity deals through Halifax so we are confused as to why this is only now becoming an issue..

Has anyone had a similar experience.. where do we stand with this .. we have spent £1500 on house reservation, legal fees and valuation.. If the deal falls through do we have a claim to get any of this money back.. I feel as though we ahve done nothing wrong yet have paid put £1500 without getting a deal.. Anyone had a similar experience to this and have any thoughts about what we can do ? Please help! :mad:

GMS

You have paid to reserve a house with no finance in place. You cannot recover costs from anybody.

A lender will generally want an unrestricted first charge. This is not possible with a builder retaining interest.

What the houses were sold for 2 years ago is totally irrelevant. Today's value counts.

Sorry to be so blunt but you are seemingly trying to buy a house with no deposit, in effect a 100% mortgage. Lender's will be very very reluctant to get involved as there is no buffer zone for them.

Muhasib

GMS - aren't you being a bit harsh on the OP: they have said they have provided 10% as a deposit themselves, it doesn't seem like a 100% mortgage if this is correct.

reggie01642

Its not 100% mortgage it is 90% .. and I would disagree that a 40% fall in price since 2008 is insignificant..

Also we did have the finance in place/ Halifax had agreed and still agree to the mortgage before we reserved the house and began conveyancing etc ..We actually could have borrowed twice as much but being cautious..

They are still willing to give us the money ..As I said we were set to complete when Halifax raised a query about the contract at the last minute and asked the builders to change it which they are unwilling to do ..

The builders and Halifax have done thousands of deals like this so we are confused as to why this clause in the mortgage contract has held up our move on this occasion. I cant see what we could have done differently and are victims of a disagreement between the two parties. Either the builders have recently changed their contracts, or Halifax have either missed this/turned a blind eye until now either way it leaves us stuck and doesnt seem fair because I dont feel as though I have done anything wrong and yet I am still £1500 out of pocket.

opinions4u

Lots of words, but little clarity.

1) What's the purchase price.
2) Does the builder's deposit of 15% mean that you are buying 85% of the property and they are holding on to a 15% share?
3) Have you had a mortgage offer yet (or merely an 'agreement in principle' which, to be blunt, is a guide to mortgage availability and not in any way a commitment to lend you the money)?
4) What precisely is causing the problem? Put it in to one sentence.
5) What does you solicitor say?

We actually could have borrowed twice as much but being cautious

Don't think you'd get a 180% mortgage .

Halifax are refusing to release the funds because they are unhappy with a clause in the contract which says that they would have to have consent from the builderto reposess the house should they want to do so

Took this in after reading Brit's post before. I don't think you've got a hope in hell of getting a mortgage on this property. That's a ridiculous clause to expect a lender to agree to.

ERICS_MUM

You say you and the builders are waiting to complete the sale, but have contracts actually been exchanged yet ? Have you and the builders paid your 15% and 10% respectively to the bank or have you paid your 10% to the builders in order to reserve the property ?

brit1234

reggie01642 wrote: »

Halifax are refusing to release the funds because they are unhappy with a clause in the contract which says that they would have to have consent from the builderto reposess the house should they want to do so.

As a bank I would worry about that, after all the bank is loaning 80%. Why should the builder have the key control for a 10% stake. Either get them to remove it from the contract, get a new mortgage or look at new homes.

sophievenusdoom

GMS wrote: »

You have paid to reserve a house with no finance in place. You cannot recover costs from anybody.

A lender will generally want an unrestricted first charge. This is not possible with a builder retaining interest.

What the houses were sold for 2 years ago is totally irrelevant. Today's value counts.

Sorry to be so blunt but you are seemingly trying to buy a house with no deposit, in effect a 100% mortgage. Lender's will be very very reluctant to get involved as there is no buffer zone for them.

Sorry to be pedantic, but he did point out that they are also contributing 10% to the deposit...

GMS

muhasib wrote: »

GMS - aren't you being a bit harsh on the OP: they have said they have provided 10% as a deposit themselves, it doesn't seem like a 100% mortgage if this is correct.

Apologies, misread the post

GMS

reggie01642 wrote: »

Its not 100% mortgage it is 90% .. and I would disagree that a 40% fall in price since 2008 is insignificant..

Also we did have the finance in place/ Halifax had agreed and still agree to the mortgage before we reserved the house and began conveyancing etc ..We actually could have borrowed twice as much but being cautious..

They are still willing to give us the money ..As I said we were set to complete when Halifax raised a query about the contract at the last minute and asked the builders to change it which they are unwilling to do ..

The builders and Halifax have done thousands of deals like this so we are confused as to why this clause in the mortgage contract has held up our move on this occasion. I cant see what we could have done differently and are victims of a disagreement between the two parties. Either the builders have recently changed their contracts, or Halifax have either missed this/turned a blind eye until now either way it leaves us stuck and doesnt seem fair because I dont feel as though I have done anything wrong and yet I am still £1500 out of pocket.

New build properties have fallen in value from where they were in a disproportionate manner when compared to 'old' houses.

I misread the original post so not 100%. Apologies for this.

The disagreement between the 2 parties is seemingly for a very good reason. The builders are restricting the security of the lender. If Halifax would require permission from the builder to repossess then they would not lend. Would you lend money to somebody without recourse to recovery if necessary?

Builder's incentives look great up front but can and will cause issues with lenders. If Halifax are happy to give you a 90% mortgage why not ask the builder to reduce the purchase price?
You may want to check with Halifax if they will do 90% LTV on a new build.
15% builders deposit sounds unusual for Halifax. I thought 5% maximum, although technically they are not giving a deposit as they will retain the equity.
This may have been a way of getting round the new build LTV maximum which I thought to be 80%.
From the sounds of this deal it was always doomed to fall down on completion.

reggie01642

I totally agree with the banks stance but I dont understand why it is only now that this has become an issue.. Surely this has happened before?.. Only two banks even offer shared equity mortgages and we were warned off Nationwide by both the builder and IFA due to their reputation in valuing properties .. .. If the builder cant deal with Halifax then how do they hope to sell any properties and how have they done so in the past.. Either they have just added this clause or the bank have just turned a blind eye or never noticed it.. Either way I dont feel as though I could have done anything differently, have been honest and acted in good faith .. and I am still significantly out pocket surely this cant be right and there is some come back/legal protection for us on this issue..? Or maybe we just cut our losses and move on.. I really dont understand because in the current client banks and builders cant be too picky and cash flow is king I would have thought especially as we are borrowing well within our means and have secure (if there is such a thing these days) reasonably well paid professional jobs (newly qualified Doctor and experienced nurse).

Point taken about the 180% mortgage .. what I meant to say was the bank would have given us double what we want .. provided we could have put in a 25% deposit .. which clearly would have been a stretch! More to illustrate the point that we arent stretching ourselvelves to get on the ladder ..