Mortgage deal and builders incentives

Supadupa

Hi all,

We recently reserved a plot to purchase an off-plan house. We are using a broker to arrange a Halifax mortgage. It seemed to be taking a while to get processed and when it was chased up Halifax questioned whether we were taking any builders incentives which are not allowed in the deal but no concern as we're not. What we did do however was negotiate £25k off the original sale price.

Yesterday we discovered that the builder put on a form that we were taking a builders incentive of a £25k discount. Our solicitor is looking into this and hopefully getting written confirmation from the builder that we are not receiving an incentive but I wondered-:

1. Are the Halifax likely to accept a change in view from the builder?
2. Would there be any advantage for the builder to call it an incentives rather than a sales negotiation on price?

Thanks

Thrugelmir

When's the building due for completion?

ethank

You've not stated what the sale price of the property is or whether the builder dropped the price by £25k or has gifted you a deposit of £25k.

A gifted deposit (when part of the balance (usually 5%) is paid by the company / person(s) selling the house, allow the buyer to have the incentive of a lower LTV – gifted deposits are common in new build properties) cannot exceed 5% of the total purchase price for most lenders.

If it was a simple reduction in price for instance they charged you £200k for a £225k house - then this should be fine. And it should not have been listed as an incentive - as that is just the sale price.

£25k does sound like a massive reduction in my opinion!

Thrugelmir

ethank wrote: »

£25k does sound like a massive reduction in my opinion!

Most likely with conditions attached.

Supadupa

Thanks so far. The house is due to be completed in 14-16 weeks weather permitting. They are listed as £245k and when I asked if there was room for negotiation the Sales girl says yes they would probably accept £225k. We offered £215 k, they came back with £220k, we offered £218k and they stuck at £220k and we agreed.

There was never any mention of incentives or gifted deposits. It's a small independent builder with only two plots left and the houses are being built as they are sold. The sales girl phoned up the owner of the company with our offer straight away and got his agreement directly.

ethank

If it is as you say it is, just a price of £220k for the house - then there should be no reason for this to be listed as an incentive. I would ask the seller to provide an order form which simply has the sales price for the property.

Make sure you inform your solictor - they will need to complete the CML incentives form with no incentives.

Thrugelmir

Supadupa wrote: »

The house is due to be completed in 14-16 weeks weather permitting.

That's not off plan. Off plan is pre construction.

Thrugelmir

Supadupa wrote: »

2. Would there be any advantage for the builder to call it an incentives rather than a sales negotiation on price?

Thanks

Yes, as land registry will record the selling price as £245k not the net price of £220k.

Supadupa

Ok thanks. Nothing is built yet-they plan to get the foundations down starting next week-mortgage permitting hence my reference to off- plan but I'm new to all this so may have the terminology wrong.