New build incentive limit on mortgage?

sartois

Hi,

Hope someone can help here.

I have reserved a new build apartment in London. The purchase price is £300,000 and I am using the Help to Buy 20% equity scheme. I already had a AIP from my Mortgage broker, but the Housing provider wanted me to use their Mortgage broker instead. I was resistant up until the point that they offered me £5000 towards the Stamp duty as a condition of using their Mortgage broker. So far so good.

However, the new Mortgage broker has advised that the maximum incentive that Halifax (where the AIP was obtained) will allow is 1% of the purchase price and has informed me that I need to go back to the Housing provider and get them to amend the Reservation to reflect a £3000 incentive instead of the £5000 offered.

I have asked where I can view this in writing but the Mortgage adviser doesn't know where or if it's written anywhere and it all seems to be based on 'the way it's always been'.

I'm not keen on reducing what I negotiated unless I really have to, and would be okay with it if I could see it written somewhere.

Is this normal? Anyone have any similar experience?

Thanks in advance

kingstreet

Halifax incentive limit is 1%.

Why use them? There are other lenders with better rates who accept upto 5% incentives.

sartois

Thanks Kingstreet. I've been looking and can only find a link that says its 5% for halifax here on the New build section:

http://www.halifax-intermediaries.co.uk/criteria/mortgage/default.aspx?filter=N

As for why Halifax, well, the main reason is that I am an IT contractor. I originally went through a contractor specialist mortgage adviser and this is where I have the AIP. From my understanding I am limited to particular lenders as I do not have 2 years of accounts at this stage. The new Mortgage broker is not quite so familiar with the contractor market so spoke to Halifax directly to ensure it would be okay so think I am limited here.

I don't get it though? Why only 1%? So the process now is that I need to go back to the Builder and tell them to revise their incentive to £3000? Even though the only link I can find says its 5%?

kingstreet

They will accept 5% builders deposit on non HTB-EL cases, but on HTB - EL, the loan plus incentive must not exceed 95% of the 80% share.

For example, £100,000 purchase price, loan £75,000. 95% of the 80% share is £76,000 so the maximum incentive is £1,000.

If you do that maths, that comes to 1% of the gross purchase price.

You can negotiate a price reduction as an alternative, but any cash incentives over 1% will be deducted from the valuation like a purchase price reduction anyway.

Plenty of newbuild lenders won't accept incentives at all. NatWest and Coventry for example.

jamesml

Without wanting this to sounds devious at all, could you try and get them to offer some other form of incentive instead? Carpets, upgraded white goods, discounts on extras etc will all have benefit to you as well as being less likely to be noticed on valuation. Plus those don't have a cash impact on the developer so you might actually end up in a better position.

Is it bad to suggest that?!

kingstreet

Non-cash incentives are fine and not taken into account.

sartois

Ok I see... I think! So in theory then I should ask the builders to drop £2K off the price, and give me 3K towards Stamp duty?

Do you know if this is written down anywhere? The link above doesn't imply any difference between HTB-EL or not. Normally this information should be available publicly shouldn't it?

My biggest concern here is that I have to go and tell the builders to change their offer myself. There will be nothing in writing anywhere confirming why I am doing this and if anyone was wrong/misinformed I will have no comeback at all and will look like an idiot for not checking the T&Cs.

The link above states that the mortgage offer will be lower if I have exceeded the incentive, but my broker is suggesting there will be no offer at all if I don't tell the builder to reduce their incentive. Surely I would be slightly better off with a £2K lower mortgage rather than getting the builder to lower their incentive?

sartois

jamesml wrote: »

Without wanting this to sounds devious at all, could you try and get them to offer some other form of incentive instead? Carpets, upgraded white goods, discounts on extras etc will all have benefit to you as well as being less likely to be noticed on valuation. Plus those don't have a cash impact on the developer so you might actually end up in a better position.

Is it bad to suggest that?!

Thanks but sadly no. I couldn't even get them to upgrade the white goods by paying extra myself as they are being built to a standard spec..

Negotiation was only possible due to my initial insistence on not using their broker. Demand vastly outstrips supply so they really don't need to offer anything at all.

kingstreet

sartois wrote: »

Thanks Kingstreet. I've been looking and can only find a link that says its 5% for halifax here on the New build section:

http://www.halifax-intermediaries.co.uk/criteria/mortgage/default.aspx?filter=N

As for why Halifax, well, the main reason is that I am an IT contractor. I originally went through a contractor specialist mortgage adviser and this is where I have the AIP. From my understanding I am limited to particular lenders as I do not have 2 years of accounts at this stage. The new Mortgage broker is not quite so familiar with the contractor market so spoke to Halifax directly to ensure it would be okay so think I am limited here.

I don't get it though? Why only 1%? So the process now is that I need to go back to the Builder and tell them to revise their incentive to £3000? Even though the only link I can find says its 5%?

Did you read to the end of that link? Specifically the section on shared equity cases?

Cash incentives for shared equity applications are acceptable provided the total value of the loan plus incentive together does not exceed 95% of the value of the equity share being purchased.

Which is what I set out above.

sartois

kingstreet wrote: »

Did you read to the end of that link? Specifically the section on shared equity cases?
Which is what I set out above.

Ah I see. I was thrown by the terminology with this. So Shared Equity equals Help to Buy Equity Loan? Fair enough and thank you - I didn't really take that part in, and I presumed that it was related to Shared Ownership scheme rather than this one.

I would really appreciate your thoughts on my other point though regarding not making any change to the builders incentive.

The link above states that the mortgage offer will be lower if I have exceeded the incentive, but my broker is suggesting there will be no offer at all if I don't tell the builder to reduce their incentive. Surely I would be slightly better off with a £2K lower mortgage rather than getting the builder to lower their incentive by £2K?

Thanks again for your responses.

kingstreet

kingstreet wrote: »

You can negotiate a price reduction as an alternative, but any cash incentives over 1% will be deducted from the valuation like a purchase price reduction anyway

Already answered.