Incentive value larger than Help to Buy threshold/

AlrightBoy

Hi,

I'm currently awaiting a mortgage approval from Halifax (valuation was agreed last week). Today, my MA has informed me that the incentive offered by the builder - £3,500 land transaction tax paid - is larger than the threshold allowed for incentives with Help to Buy. She said that the largest incentive amount lenders are able to accept is £2,600, which is a condition of Help to Buy.

The only information I'm able to find on this is through the Help to Buy Wales website handbook which states the following - "Incentives could include the payment of fees or provision of white goods. Incentives must comply with Council of Mortgage Lenders (CML) guidance and not exceed 5% of the purchase price and therefore impact on the valuation of the property."

The house I'm purchasing is £272,995, and £3,500 land transaction tax is well under 5%. Fortunately, due to the land transaction tax changes in Wales, the LTT due has dropped to £1,150 which is obviously below this magical £2,600 figure, but our builders now need to submit a new CML disclosure of incentives form (why this wasn't done when the stamp duty changes came into fruition is beyond me), which will undoubtedly put unnecessary delays on the process and it's now likely to result in us missing our 31st July deadline to exchange.

Is anybody familiar with this policy, or is it likely somebody has totally got the wrong end of the stick? I can't figure out how this crucial oversight has been through our builders, mortgage advisor AND conveyancer without anything being flagged.

Thanks in advance.

mortgagetakingages

Sounds like someone doesn't understand %

AlrightBoy

mortgagetakingages said:

Sounds like someone doesn't understand %

Care to explain why rather than insulting my mathematical knowledge?

Perhaps I don't understand how this works in the context of Help to Buy's explanation, which is why I've asked the question, but 5% of £272,995 is £13,649.75 (higher than £3,500), is it not? 

mortgagetakingages

I meant the person who told you!

AlrightBoy

mortgagetakingages said:

I meant the person who told you!

How embarrassing, sorry! I appear to be taking everything to heart today.

mortgagetakingages

Mortgages have this effect

kingstreet

Halifax limits builder cash incentives on HTB/shared equity dependent on deposit. For example, if you are putting down only 5% deposit, the max incentive is 1% of the PP. This is because the mortgage amount + incentive cannot exceed 95% of the (eg) 80% being purchased. The more deposit, the higher the incentives permitted and IIRC from 9%+ deposit, the full 5% can be accommodated.
From criteria;-
"Cash incentives for shared equity applications are acceptable provided the total value of the loan plus incentive together does not exceed 95% of the value of the equity share being purchased."

mortgagetakingages

So if you are only paying 5% deposit you can have no incentives?

kingstreet

mortgagetakingages said:

So if you are only paying 5% deposit you can have no incentives?

"if you are putting down only 5% deposit, the max incentive is 1% of the PP."

kingstreet

For example, £250,000 purchase, 5% deposit.
£200,000 = 80% share
£190,000 = A 95% of 80% total (mortgage amount and incentive combined cannot exceed this)
£187,500 = B 75% mortgage.
£2,500 = A minus B.
£2,500 = 1% of purchase price.

mortgagetakingages

That makes sense.