Question: A developer in our area is offering such good incentives that my wife and I are considering buying one of its new homes.
© Malcolm Willett (www.willett-ink.co.uk)
It is offering to pay our legal fees, stamp duty and provide a vendor gifted deposit scheme.
I have spoken to our financial adviser who says all these incentives must be reported to the lender he’s approached for our mortgage. What is this all about?
Answer: Incentives are really a way of reducing the amount you have to pay for a property. When your financial adviser seeks a mortgage for you, the lender’s decision will be based on percentages.
So, if the price of the property you intend to buy is £300,000 and your lender will loan you 75 per cent, that means you can borrow £225,000.
However, when all the incentives are taken into account your loan will actually end up being more than 75 per cent of the price you are paying for the property.
The lender must be informed of all the facts, so your financial adviser must tell them about the incentives.
Some lenders will allow incentives up to a certain percentage of the purchase price without this affecting the loan they will make - but they must be informed of them. In any event, it is a requirement of the Council of Mortgage Lenders for incentives to be reported.
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If you have a question for Fiona McNulty, email email@example.com. We regret that questions cannot be answered individually.
Fiona is a partner in the property team at Thring Townsend Lee & Pembertons Solicitors www.ttuk.com.