5% deposit paid?

kieron79

Looking to possibly purchase a new build and developer has offered to pay 5% of the deposit.

Situation is as follows, we have limited equity in our home so we put a further 5% down ie:
purchase price = 290k
My deposit = 14.5k
Developer contribution = 14.5 k

Am I limited to who will lend to me with this arrangement or is this common practice?

Thrugelmir

Property will be valued on net price i.e. £290 minus £14.5k for mortgage purposes.

bsms1147

If they reduced the purchase price rather than giving a contribution (ie purchase price 275.5), your LTV would be higher and you have a greater chance of the mortgage valuation being sufficient. Also SDLT and other fees would be reduced.

You should be able to get a 5% mortgage on those terms providing you meet the affordability criteria.

kieron79

Thanks, so in essence I won't be able to get a 90ltv mortgage with my 5% and theirs. Not keen on 95ltv mortgage due to a)increased premium and unattractive rates

kingstreet

There are lenders which will accept a 5% builder's deposit, but none of them offers 90% on a newbuild.

Typically, you'll need 10% of your own, 5% from the builder and a lender which offers upto 85% on a newbuild house.

If it's a flat the max LTV will be lower than that.

kingstreet

In addition, unless the builder is offering it on NewBuy, you won't get 95% on a newbuild either.

kieron79

Thanks for clarifying that for me

kieron79

Kingstreet, been informed Clydesdale will consider 90ltv on new build?

glosoli

kieron79 wrote: »

Kingstreet, been informed Clydesdale will consider 90ltv on new build?

This is correct, 90% new build houses and 70% new build flat.

kingstreet

As Clydesdale won't accept incentives, you need 10% yourself, the builder's deposit won't be accepted.

As I said, I don't know a lender which will lend 90% on a newbuild house which accepts incentives.

If you now have 10% deposit of your own, you can look at lenders who will lend upto 90%, of which there are two or three.