Stamp Duty - Mortgages - Developers

StuieUK34

Hi all,


I'm confused, wonder if any of you have an insight into this.....

Buying a new-build from a developer. (£272)

I am First Time Buyer, wife isn't... (so i know Stamp Duty is payable)
We are also using the "" 20% Government help themselves to your Equity Loan + interest after 5years"" , a nessasary evil.... ....

Developer has offered (incentive) to pay the stamp duty (works out to be £3600)
We are doing 5% Deposit + 20% Equity loan + 75% mortgage.

However, mortgage lender doesnt like that the developer will pay our stamp duty.
I dont understand this ?
If the developer gives the money to the solicitor to pay the government, or the developer transfers the money to me, to give to the solicitor and pay the government, the end result is:
Government gets paid, mortgage remains the same value with or without stamp duty being paid.

So i am puzzled as to why some lenders dont like the fact a developer is helping a buyer to buy a house ? cant see an angle for a fiddle ?

foxy-stoat

StuieUK34 wrote: »

So i am puzzled as to why some lenders dont like the fact a developer is helping a buyer to buy a house ? cant see an angle for a fiddle ?

The developer has increased the sale price of the property so they can offer you "free" SDLT.

So they can inflate the sale prices of their properties.

Lenders know this now so they will normally reduce the amount they will lend you, as in my case as I had to fund £15,000 of incentives myself as my lender dropped the amount they were willing to lend me after they found out about them.

The solicitor will need to confirm all incentives to the lender - so better it is known to then at offer stage rather than after exchange.

davidmcn

The fact it's SDLT is irrelevant, if they were bunging you £3600 worth of carpets or something else the answer would probably be the same. It means the net price is really £x minus £3600, not whatever the "headline" price is stated as.

StuieUK34

sorry, just to note, the house price was £280k/£284k, and 6 of the other houses (same house) sold for the asking price...
The new build is batch of a few that are built and un-sold at present...
So i already got a reduced price + SD to be paid by them + flooring (kinda said, i want freebies+reduction if you want a house sold in the Jan Sale!) ...

ie: same example is going to the car store, and that car u know is worth £10k, i paid £9200 for it and got some furry dice (ok, bad example, but same principal)

Understood with over-inflating prices, like shops do in the run up to the "black friday sale".....
But this is genuine good deal for us, the buyers, no inflating prices....
(thanks for the replies )

foxy-stoat

StuieUK34 wrote: »

sorry, just to note, the house price was £280k, and 6 of the other houses (same house) sold for the asking price...
The new build is batch of a few that are built and un-sold at present...
So i already got a reduced price + SD to be paid by them + flooring (kinda said, i want freebies+reduction if you want a house sold in the Jan Sale!) ...

ie: same example is going to the car store, and that car u know is worth £10k, i paid £9200 for it and got some furry dice (ok, bad example, but same principal)

Apart from buying £10,000 cars doesn't make the economy go round, the numbers are way bigger.

A few years ago the lenders didn't cotton on to the free SDLT and other financial incentives - now the industry is more closely regulated everything needs to be transparent for the lenders to make their lending decisions.

Its better and easier for the developer to advertise a £400,000 house for £425,000 and offer free SDLT, free carpet, free washing machine and £10,000 off the list price than just advertise a £400,00 house for £400,000. Some people may not need to take the freebies, thats for the sales people to work out how much the need to "give away" to get the sale.

On a smaller scale, Currys need to advertise a £400 laptop for £800 4 weeks a year in order to call it a "genuine" 50% off sale. You may get the odd numpty pay £800 for it, but generally there will be another £400 laptop in "the sale" at the same time.

xthrash

I guess this is lender specific - I was under the impression that incentives up to 5% of the property value was generally acceptable?

StuieUK34

i heard that too, but 5% would be £13k...
I was told, overall, lender dont care if developer gives u £15k in white goods, just a case the lender dont like it if the developer pays your stamp duty !


Bovis new homes currently have adverts in there showrooms that show: £6k stamp duty paid or £6k towards upgrades...
Odd !
Oh well, these replies have helped, and i do get about over-inflating prices....

steampowered

StuieUK34 wrote: »

ie: same example is going to the car store, and that car u know is worth £10k, i paid £9200 for it and got some furry dice (ok, bad example, but same principal)

If furry dice are worth £10, the car is really worth £9190 (not £9200).

It's the same principle, it's just the numbers are bigger. If you are paying £300k but getting £10k straight back from the developer to pay your stamp duty, the house is only really worth £290k.

That's all fine so long as the house is still within your mortgage lender's affordability criteria.

StuieUK34

affordability (it shows max they will lend us) is £380000 based on our salary, but i am tight, hence putting the time and effort in to get the developer down on price, and then asking for SD to be paid + extra's!


The Mortgage will be £204k (75%) ....
once i know what the work-around is, i will post on here so thread can be closed