Sellers should avoid Cashbacks and Gifted Deposits

clutton_2

""CML handbook"" - is constantly being upgraded - gifted deposits have become increasingly difficult to get from any lender - and i think they are all but gone now .....

bobby-boy_2

Hi going to sound stupid here-CML handbook?

Got it Council of Mortgage Lenders CML

Jorgan_2

Council of Mortgage Lenders handbook.

Richard_Webster

Extract from CML Handbook:

6.3.2 You must tell us (unless we say differently in part 2) if the contract provides for or you become aware of any arrangement in which there is:
6.3.2.1 a cashback to the buyer; or
6.3.2.2 part of the price is being satisfied by a non-cash incentive to the buyer or
6.3.2.3 any indirect incentive (cash or non cash) or rental guarantee.

Any such arrangement may lead to the mortgage offer being withdrawn or amended.

However, some lenders say (or have said) in their instructions that they will accept price reductions or equivalent incentives so that's probably what Jorgan was referring to. Whether they will do that now is another matter - but I have just had some Halifax instructions (where in this case the LTV ratio is around 71%) where I am not allowed to release the mortgage advance if (inter alia):

"...the purchase price for the property is less than the amount set out in these instructions, unless the difference between the amount set out in these instructions and the actual purchase price is 5% or less of the amount set out in these instructions..."

Why on earth Halifax have put that in I cannot imagine - possibly they don't do it for 90% loans. However, this is a price reduction NOT a cashback/gifted deposit which would be caught by the paragraph quoted above.

poppy10_2

jimc wrote: »

Free cars here! It's a Ford Focus free with every house sold!

Is that better than a free Citreon C1 with every new-build flat sold?

tinkerbell321_2

Richard_Webster wrote: »

You can't fool a lender into giving your buyer a higher loan to value ratio mortgage by making a "gift" of or paying a 5-10% deposit.

Buyer's solicitor will have to tell lender about it, otherwise it's mortgage fraud.

Until recently some lenders would accept this kind of thing because they wanted the business, particularly with newbuilds. Doubtful if they will still do it. They will simply downvalue the property accordingly and offer a smaller loan based on the true LTV ratio. So don't waste time on these schemes.

I've put up this post so I can keep referring back to it every time this idea gets mentioned!

I HAVE BEEN INFORMED BY MY SOLICITOR WHO IS AN ELDERLY SOLICITOR AND BEEN IN THE LEGAL BUSINESS FOR A VERY LONG TIME, THAT IT IS COMPLETELY LEGAL! A.N.D IT IS UP TO THE BUYER TO INFORM THEIR LENDER! I REPEAT IT IS COMPLETELY LEGAL!
IF THIS GETS YOU A SALE IN THESE HARD TIMES AND IF YOU HAVE ENOUGH EQUITY WHICH YOU DONT MIND 'GIFTING' THEN GO AHEAD AND DO IT DONT LISTEN TO THESE NUMNUTS WHO TELL YOU ITS DODGY COS IT AINT!

tinkerbell321_2

brit1234 wrote: »

Not at all. These gift deposits are actually factored into the price. You are actually buy a more overvalued property than the norm.

In other words you have been sucker punched.:exclamati

CRAP! if you have enough equity and you are selling at a low price to get a quick sale and you have enough equity to play with cos you know for sure how much yer property is worth! ie; not on the market at an overinflated price, then you can lower your asking price and 'gift' some of that equity to your buyer if they need it! so stick that in yer hat and smoke it! IT IS COMPLETELY LEGAL SO DONT GO GIVING OUT STUPID ADVICE!

Doozergirl

tinkerbell321 wrote: »

I HAVE BEEN INFORMED BY MY SOLICITOR WHO IS AN ELDERLY SOLICITOR AND BEEN IN THE LEGAL BUSINESS FOR A VERY LONG TIME, THAT IT IS COMPLETELY LEGAL! A.N.D IT IS UP TO THE BUYER TO INFORM THEIR LENDER! I REPEAT IT IS COMPLETELY LEGAL!
IF THIS GETS YOU A SALE IN THESE HARD TIMES AND IF YOU HAVE ENOUGH EQUITY WHICH YOU DONT MIND 'GIFTING' THEN GO AHEAD AND DO IT DONT LISTEN TO THESE NUMNUTS WHO TELL YOU ITS DODGY COS IT AINT!

I'd try to read the original post properly before you start SHOUTING AT PEOPLE!

No one said it was illegal, just that it doesn't work the way that EAs hope it will when they're persuading vendors to do it. Where it has worked in the past it is less likely to work now. Private vendors should try not to set themselves up for a fall.

I'd refrain from being so rude before you find all of your posts deleted.

hev_2

Elderly solicitors don't always keep up.

To be fair, some do. But not all.

ETA Most elderly solicitors who have kept up are District Judges, not in private practice

Jorgan_2

tinkerbell321 wrote: »

I HAVE BEEN INFORMED BY MY SOLICITOR WHO IS AN ELDERLY SOLICITOR AND BEEN IN THE LEGAL BUSINESS FOR A VERY LONG TIME, THAT IT IS COMPLETELY LEGAL! A.N.D IT IS UP TO THE BUYER TO INFORM THEIR LENDER! I REPEAT IT IS COMPLETELY LEGAL!
IF THIS GETS YOU A SALE IN THESE HARD TIMES AND IF YOU HAVE ENOUGH EQUITY WHICH YOU DONT MIND 'GIFTING' THEN GO AHEAD AND DO IT DONT LISTEN TO THESE NUMNUTS WHO TELL YOU ITS DODGY COS IT AINT!

Quick question for your long serving, elderly solicitor, who does the solicitor act for during the purchae of the property when there is a mortgage involved, is it;
a) The buyer
b) The mortgage lender
c) Both