Help To Buy - Discounted New Build

DIYBaldyman

Hi, can anyone help with a question regarding a property my son & his partner are about to buy please?

Purchase price is £299,995. They have their required 5% deposit, but the developer (Bellway Homes) is also offering a further 5% discount due to my son being a member of the Emergency Services.

Therefore the discounted price they pay will be £284,952.50.

Question - how should the Help To Buy Equity Loan be set-out?

My thought is - Original Property Purchase Price - £299,995, less 5% discount, less 5% deposit, less 75% mortgage, leaving 15% of the original price required for the equity loan (£44,999.25)

However Bellway's FA is saying the Property Value is the discounted Purchase Price, ie the £284,952.50 price, they pay 5% deposit, 75% mortgage & they will need a 20% equity loan (£56,990.50).

Therefore Govt buys 20% of the property (of which others on the same development without the ES discount are selling for the full price) for 20% of the discounted price.

Is that right or are they being stitched up?

Thank you to anyone able to advise.

SamJ35

I'm trying to figure this out but I think that being given a 5% discount does not equate to them receiving a 5% extra equity in the property, which I think is what your first example is showing. 

The discount in my mind should be treated as a negotiation on the price of the house. So Bellway's example is correct if I'm understanding right. The house price is 284,952.50, not 299k. 

If I negotiated with a seller on a house worth 300k, and offered 285k, and this got accepted, I would get a 75% mortgage on the 285k (and a 25% deposit). I would not say I only need a 70% mortgage on the original 300k because I am getting 5% off.