Cashback offer as an incentive for house sale

Flashmanchop

JQ. wrote: »

As stated above, it won't help with the mortgage as the lender will just deduct the 3k from the offer.

What, just like they do when you put 10%, 15%, 20% 30% in as deposit ??????

brit1234

SG27 wrote: »

I'm a first time buyer and I think these incentives are a waste of time. I'd much rather just have £3k off the asking price!

I agree, as a first time buyer I would ignore this property and just assume it was overvalued.

Even estate agents are getting sick of vendors over pricing now.

JQ.

Flashmanchop wrote: »

With an attitude like that, your clearly here for financial help.

Your basically saying that you would rather pay more for a house?

10% @ £85k = £8,500
Net Mortgage = £76,500

10% @ £88k = £8,800 - £3000 = £5,800
Net Mortgage = £79,200

(Possible) difference montly c. £13.03, BUT your £3,000 Poorer.

Unfortunately, I thinks it's you who requires financial help. Mortgages don't work like that. Hence all the comments in this thread.

Flashmanchop

JQ. wrote: »

Unfortunately, I thinks it's you who requires financial help. Mortgages don't work like that. Hence all the comments in this thread.

So, how do they work?

I thought you had a gross price of a house, you put money in as deposit, whether gifted or your own, and then that gave you a net figure to mortgage?

Or have I been missing something?

5% deposit paid is seen as a way of helping first time buyers, who may not have the whole amount as depsoit.

the home value (Gross) is still the samer amount registered as Land Registry

Flashmanchop

Gifted deposits such as 5% deposits, aslong as declared to the mortgage company are ok. 5% is often the maximum though.

JQ.

Flashmanchop wrote: »

So, how do they work?

I thought you had a gross price of a house, you put money in as deposit, whether gifted or your own, and then that gave you a net figure to mortgage?

Or have I been missing something?

5% deposit paid is seen as a way of helping first time buyers, who may not have the whole amount as depsoit.

the home value (Gross) is still the samer amount registered as Land Registry

You are missing something. The vendor offering £££ cashback is not a gifted deposit, it's just a method of over-inflating the price of the house to make the deposit appear bigger than it actually is. They're not gifting you their money, they are gifting you your mortgage company's money.

In the old days banks knew this was going on, but just turned a blind eye because prices were rising so quickly it did not matter. Nowadays they're alot more interested in making sure they have a secure long term investment.

So in the example you used. House worth £85k and vendor offers £3k cashback. Buyer pays £88k. Mortgage company will only lend on the actual purchase price of £85k, making the cashback pointless.

An extreme example to illustrate the point - my house is worth £100k - I offer £1m cashback on purchase so someone pays £1.1m for my house. Do you think a bank will lend 90% of the purchase price (£990,000) for a house only worth £100,000?

When the recession started this is one of the main reasons a number of lenders stopped lending on new build flats. There were so many different types of incentives being offered (cash, cars, scooters, furniture, TV's, white goods, gym memberships, guaranteed rental returns) that it was actually very difficult for valuers to calculate the actual transaction price net of incentives. So many lenders just pulled out of the market.

The alternative is to not tell the mortgage company, however, that is mortgage fraud and solicitors tend not to like being party to criminal acts.

Flashmanchop

Fair Point.

Less speed more haste on my part.

Why doesnt he just offer £3k deposit instead.

JQ.

Flashmanchop wrote: »

Fair Point.

Less speed more haste on my part.

Why doesnt he just offer £3k deposit instead.

It doesn't matter what you call it, a vendor giving a buyer cash (or any other kind of incentive) will just be discounted by the mortgage company.

These types of deals are one of the reasons why we have had such large house price inflation and why so many people are now in negative equity.

Flashmanchop

I really ought to read the question...

Must try harder 4/10

Flashmanchop

JQ. wrote: »

It doesn't matter what you call it, a vendor giving a buyer cash (or any other kind of incentive) will just be discounted by the mortgage company.

These types of deals are one of the reasons why we have had such large house price inflation and why so many people are now in negative equity.

I have used it to sell stock to first time buyers in lower value areas where I have had an RICS survey for £x value, and I have offered as 5% gifted deposit, from the valuation to aid a sale, rather than inflating the prices to cover the factitious 5%. The mortgage company were happy with the 5% thereby not inflating the price, not breaking any rules, and not being discounted by the lender.