New build purchase DWH worries...

B3Nji

Hi all,

Long time lurker first time help required!

My girlfriend and I reserved a new build 3 weeks ago, it is one of the final ones on the site, it's built and just requires flooring installed. Its a 3 bed semi at £224,995. We should be signing the contracts and getting the keys next Friday.

Multiple incentives were advertised on right move for this property, they told us they would like a fast turn around of 28 days.

The incentives are;
£1500 legal fees paid
£1000 removal van costs
Stamp duty paid
Top tier flooring
Top tier kitchen

We also negotiated for them to pay us the last 3 months rent for us. This will be £2085 for 3 x £695 a month.

Now being very skeptical on all these incentives I asked the lady at David Wilson Homes how these incentives would be paid before we put the £500 reserve fee down. She assured us it's not a scam and we will receive the money. But she didn't know the exact details of how this would happen. On this basis we reserved and moved forward with them.

Something else I failed to mention is they forced us in to using a more expensive mortgage provider. Under the guise that our preferred option would not turn the mortgage offer around quickly enough. Again they insisted we would be reimbursed via incentives.

After multiple talks with their appointed mortgage broker and the solicitor they insisted us have due to the legal fees being paid, we get an email from our (their?) solicitor yesterday...

We will not actually be receiving the money but the cost will be deducted from the purchase price! This has been confirm in email for our supposed £1000 removal fees and payment for the higher mortgage we had to run with. These are the only confirmations because they are responding to specific questions we had. I can only assume the legal and our rent is also lumped into this deal.

I'm not a clever chap but this seems to be a bit of a swindle in my feeble mind. If it is true in the case of our rent then we will have to pay double (rent and mortgage) for our first 3 months!

My better half and I will be taking a trip to DWH later on today to get some answers. Unfortunately we will have to pull out of the purchase if we are correct in our assumptions and loose our £500 and have to pay solicitor 'abortive" charges!

Please can one of you helpful people advise us? Have I got this backwards and in truth it is not some sneaky discount disguised as vaporous incentive?

Many thanks for reading!
Ben & Ria

Errata

Why on earth haven't you got EVERYTHING in writing?

[Deleted User]

I know you will lose money now..., but think how much money you will lose long term on this deal if you go through with it.

Yes, before you pay out anything on fees make sure you have what you will get in writing beforehand. But hindsight is 20/20.

B3Nji

We have all the incentives in writing as per the original reservation document.

However they (DHW lady) could not tell us how the incentives were going to be transfered, she said it was out of her remit. She referred us to the mortgage advisor who also could not assist. They would not confirm anything (not through lack of trying) in writing about how this would work.

The solicitor we have been appointed is a trainee who has messed up multiple times. We have complained but nothing appears to have changed. They only got back to us "in writing" about this yesterday.

B3Nji

Just to clarify. What we are after is advice on the legalities of DWH transferring the money to us.

I have read that a maximum of 5% of the purchase price can be gifted by builders. The money is transfered to the solicitors and then to us. Is this correct?

I'm not so fussed on loosing the £500 if it means not getting hoodwinked into something I don't agree to.

Thanks for all your advice!

kingstreet

On completion day, your solicitor will pay over £x amount less to the builder's solicitor.

£x being the value of the incentives.

This means when you are asked for the final funds needed to make up the purchase monies, you will pay over £x less.

Money you don't pay is just as good, if not better, than money you get back later.

B3Nji

Thanks for that info.

Does this mean we will hand over less deposit or have a smaller mortgage?

So am I right in saying what we are getting is a discount and not seeing any of these incentives? So will ultimately be renting and paying a mortgage for 3 months?

kingstreet

If your deposit, legal fees and stamp duty come to £15,000 and the incentives come to £5,000 for example, you will only pay over to your solicitor the £10,000 difference.

You will not have a smaller mortgage. That would be the result of a simple price reduction, rather than a builder cash incentive.

As I said, money you do not pay out is as good as money you get back. The end result is exactly the same from your point of view.

B3Nji

Thank you for clearing that up for us. That sounds like a very good plan.

Unfortunately our solicitor has said the following in the excerpt below:

"The CML is a form that has to be sent to the mortgage company to advise them of the incentives David Wilson is giving to you. Again, the £1,000 allowance for removal costs will be by way of a deduction in the in the purchase price – you will not actually receive this."

The solicitor is requesting a 10% deposit when we are actually putting down nearly 25%, and the incentives being given by DWH haven't been factored into the deposit we're putting down.

I get the feeling our trainee solicitor is confused or I have completely misunderstood what's going on.

Thanks for your advice with this.

TBeckett100

You just need to make sure your Loan to Value isn't affected

If you buy at 100k and borrow 75k that's 75% LTV
If you have incentives that reduce the cost to 90,000, the lender could view it as 83% LTV unless you reduce your mortgage to £67500

If you reduce your mortgage to 75% then you will effectively hand over a deposit of £22500 rather than 25k.

Depending on the mortgage product you have chosen, you may only have that product of you sit within a set loan to value, if that changes, you may need to change the product which could be more expensive and therefore a new offer will need to be made.

kingstreet

Lenders accept different levels and types of cash incentives.

You need to check with yours what it accepts. Some will accept upto 5% with no questions, others will deduct any incentives from the valuation, hence producing the price/mortgage reduction mentioned earlier.

10% is the deposit required for exchange of contracts and the remainder will be paid over to the solicitor ahead of completion when the incentives are taken into account at the "draft completion statement" stage.