“Allowance” when buying first property?

Toots0293

Hi, hoping for some clarity on a situation I am in. After having my survey results back, I have roughly £6,200 of works that need to be carried out and the vendor has agreed to pay half towards these costs. Rather than take the amount off the purchase price, I would prefer to have the vendor pay towards the works. The EA called this an allowance and basically it seems like once the vendor has received my deposit / payment from the lender, they will then give me back £3,500 towards the works (as they wouldn’t be completed until I have the keys). Has anyone had any previous experience with this? I have the funds to pay for all the work myself, however it will eat quite a bit into my savings and the house does need new flooring, re-plastering etc, so I would prefer to just pay half if possible. I have asked my solicitor for guidance, but just wondering if anyone else has done this before. 

user1977

Why do you not want to simply take it off the price? That's likely to be how your lender will treat it, however you dress it up.

dr0psofjupiter

When we had an allowance it was deducted from our completion statement. In our case it was £500 so instead of the first completion statement being (eg) £20k to pass to the solicitors on exchange, we actually had to send £19500. The seller received £500 less and we had £500 more in our pocket.

Sunsaru

user1977 said:

Why do you not want to simply take it off the price? That's likely to be how your lender will treat it, however you dress it up.

Because it only makes a slight dent in the mortgage repayments and the OP still has to pay full whack for the repairs.

user1977

Sunsaru said:

user1977 said:

Why do you not want to simply take it off the price? That's likely to be how your lender will treat it, however you dress it up.

Because it only makes a slight dent in the mortgage repayments and the OP still has to pay full whack for the repairs.

But if the lender decides the value is now price minus the allowance, how does that affect the LTV percentage?

Toots0293

user1977 said:

Sunsaru said:

user1977 said:

Why do you not want to simply take it off the price? That's likely to be how your lender will treat it, however you dress it up.

Because it only makes a slight dent in the mortgage repayments and the OP still has to pay full whack for the repairs.

But if the lender decides the value is now price minus the allowance, how does that affect the LTV percentage?

Yes that’s right, I’d rather an allowance for that reason. 

I’m putting down a 5% deposit, so already at the max LTV. If my solicitor states that for whatever reason I need to take it off the mortgage then obviously that’s what I’d do, but my EA just suggested an allowance was possible, which I’d prefer. So mainly wanted to hear if anyone else has done something similar  

Tiglet2

The solicitor can discuss this with the seller's solicitor.  Simply put, it means that on completion your solicitor will send the purchase monies minus the "allowance".  The mortgage amount doesn't change, neither does the purchase price so therefore your LTV is the same.  

Your solicitor also acts for the lender, so they will need to report this to them to obtain their consent.

IronMan22

We did this recently. You basically just take the amount off your deposit

Your solicitor needs to ok it with theirs. Our lender didn’t need to know/didn’t care (can’t recall) and we paid the completion to the solicitor (deposit and their fees) which was minus the allowance amount.

Toots0293

IronMan22 said:

We did this recently. You basically just take the amount off your deposit

Your solicitor needs to ok it with theirs. Our lender didn’t need to know/didn’t care (can’t recall) and we paid the completion to the solicitor (deposit and their fees) which was minus the allowance amount.

Ahh that’s wonderful! Hopefully we can achieve something similar. Thank you so much!