Help to Buy New Build and Options

richc87

Apologies that is my naivety on the subject. We are using Help To Buy Equity Loan, through Nationwide. So the above quote is in referance to New Buy, got myself confused.

Cant find any information from Nationwide itself but Santander say, which is from the help to buy mortgage information for intermediaries that:

We will accpet up to 5% cash back towards the purchase price and builders payment of the applicants legal fees and stamp duty only.
Any reasonable non-cash incentives e.g. white goods, carpets, curtians will be ignored.

We are not getting any cash incentives.

Now this to me says that to a reasonable limit (which i guess is discretionary) we will be allowed to have options, e.g white goods etc on the mortgage. So long as the valuation is not lower than the sale price (including options), which i doubt due to next door gaining a valuation of 180k back in January.

kingstreet

You are confusing two issues.

You are saying "on the mortgage" what exactly do you mean by that?

The lender criteria is saying it will allow cash incentives upto 5% and this will not affect the valuation, so they won't be deducted.

You need to sort out what is a discount, ie a reduction in the contract price, what is a cash incentive as described above and what is a non-cash incentive, such as white goods/flooring.

For example, if a property has a list price of £200,000 and you receive a discount of £20,000, the contract price is £180,000. You would then be paying £180,000 for the property and your loan to value would be based on that. On HTB - EL with 5% deposit, you would then need a 75% mortgage, £135,000.

If the builder is giving you a cash incentive of upto 5%, it's 5% of the £180,000 and it can be legal costs, stamp duty etc and it will not be deducted from the valuation.

Some lenders will not accept cash incentives at all, others limit them to less than 5%, so be careful with your choice of lender. On shared equity, for example, Halifax limits cash incentives to 1% of the contract price.

Non-cash incentives are normally ignored. However, the contract price still applies. You don't get to gross the price back up by the value of the non-cash incentives.

richc87

Bascially I dont really have the cash spare, after already paying the deposit to put the options in the house, which are white goods etc.

What I want to do is put that 8k onto the contract price.

Is the only way to get the housebuilder to sell me the house at 176k, that would be the contract price, and throw in all the options as a non-cash incentive? This way they would be deemed as such?

kingstreet

You don't have the cash spare for what?

Simply have them set the contract price higher, as long as it's under the list price that's fine. It's still a discount if there's a reduction from the list price down to the contract price, so it's not classed as an incentive.

As long as you're not asking for part of the discount as builder's deposit, causing your "spare cash" comment, it's pretty straightforward.

richc87

They have been trying to get me to pay cash for all the options, after raising 10k in deposit i do not have an extra 8k lying around to buy carpets and fridges. espcially as i have to furnish the house as well.

Cheers, thats all i was looking for. I thought that I was correct in what I was proposing but they have been trying to tell me that they cant do it. In my region we would do it no questions asked but they have been difficult from the start.

As you say, and as I thought, they could just up the contract price to take into account the whites goods, flooring etc, then list them as non-cash incentives.

As we are already getting a staff discount this would keep it below the list price anyway, and mean that the value for the mortgage should fall into line with the contract price not causing an issue.

ethank

You cannot use your mortgage to buy options. In the lenders eyes they do not add any value to the house.
So your options are to negotiate them as part of the deal or don't have the upgrades.

£8k seems a lot. I managed to negotiate 5% builders deposit, stamp duty paid, and carpets/flooring before my sale fell through. On the second house everything was included (but it was sat empty)

I would ask them to include the options for free, and see what they can do for you.

mishelly

Eleven thousand pounds for white goods and flooring???

E-le-ven Thouuuusaannnd!!!!

Are they coated in gold? Do they do the cooking and cleaning by themselves with no input from you?

Cant you shop round and get them elsewhere? You could save for an extra couple of months and buy them outright without having to pay interest on them for the term of the mortgage.

richc87

Haha Ye its a lot i know, but nothing comes as standard pretty much.

With already having saved for a deposit, stamp duty, legal fees and needing to furnish the house we cant afford to pay cash for them really. We are cash poor, wouldnt be using help to buy if we werent.

Ethank: that is exactly how i want to play it. The agreed sales price will be 178k a discount of 2k from the original sales price of 180k. And then list all the white goods and flooring as non-financial incentives. As we are below the list price, and the house attached to ours, which is exactly the same was valued and mortgaged in january at 180k then i would think we shouldn't have a problem with CML or the mortgage lenders.