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  • Refurbish/Develop

    Make a Help to Buy - BTS strategy

    here's a concept...

    a lot of people have a good credit score and would pass affordability for £80k - £100k properties but struggle to save a 10% or even 5% deposit.

    What about paying the 5% deposit at the point that the contracts change and the money is transferred but you put the same £5k on the price so you get it back. (£100k sale)

    Good way to get the full asking price as without a deposit there not in a great position to challenge the price?

    your also offering a new help to buy scheme which may attract a niche section of the market. Just need the details to be in the Rightmove/Zoopla listings.

    I have never seen this before so i know this is a very out there idea! :/

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    Not sure how that would stack up against mortgage lender valuation - and FTBs with 95% LTV will not get best terms.

    CML say av FTB has 17%/£24k dep and borrows only 3.11 x £38k household income (75% are couples - about half with kids)

    Those with kids will find max lending is lower than same income couple without kids - basic MMR affordability criterion

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    Unfortunately, what you are proposing is fraudulent because it is not transparent and it is creating 100% finance, which no  lender would knowingly agree to.

    If they knew of this arrangement, they would decline to lend or down-value the property by 5 or 10%, so the problem is not solved.

    People have to have "skin in the game" to get mortgage finance.  Any mechanism that seeks to circumvent that is tantamount to mortgage fraud.

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    Your solicitor the vendor's solicitor the vendor and the estate agent would all have to be complicit .Daftest idea i have heard for a long time

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    Massively successful property developers offer help to buy schemes in my area. Some government backed others are called Shared Ownership by Taylor Whimpey.

    There is a huge pot of people who can afford mortgage repayments but maybe not deposits.

    Agreed on Vanessa's point but If somebody found a way to sell to those it wouldn't be so rediculous


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    I have a slightly different opinion on this concept / proposal.

    It was common place pre 2007 and got a lot of people in trouble with over gearing and banks making huge losses when repossessing then selling on especially when 15% and 20% incentives were the norm and many did this.

    Many banks stopped any form of discount totally but my understanding is that some banks (assuming they're told up front by your solicitors and that of the purchaser are ok with this strategy and concept (although no more than 5%).

    A surveyor will likely be more thorough and check the purchase price is accurate and not 5% more than it should be. If the purchase price is still ok and the surveyor for the bank and buyer is happy at the price agreed with a bank happy with the 5% gifted deposit then its all legal above board and helpful to a potential buyer and yourself as a vendor to help speed a sale or allow a sale to occur that wouldn't ordinarily do so.

    full disclosure to all parties (broker, bank, surveyor and solicitors is the crucial element) it does often fall down with surveyor down valuing mind.

    often the worst that happens is a down valuation to the price agreed less the 5% gift - you and buyer then need to decide what to do - i.e. how much of that 5% you can swallow and if the buyer can put in an amount of that extra 5% needed.


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    regards Andrew Peers - property investor / sourcer - 07912674181

    a.peers@seamlessproperty.co.uk

    Property Redress Scheme Number 011436     NLA member 174404


    Oh and just to clarify my understanding is that the help to buy scheme only works for developers on new builds, although there is a government scheme for working with the older generation in place on standard property.

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    regards Andrew Peers - property investor / sourcer - 07912674181

    a.peers@seamlessproperty.co.uk

    Property Redress Scheme Number 011436     NLA member 174404

    Its not impossible - one main stream lender allows a 2nd charge & others would consider it.

    You used to be able to do something similar with 65% mortgage and 20% 2nd charge with Castle Trust but they removed that product (that was 85% LTV).

    Though its very difficult and something that wold not scale.

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    _________________________________________________________________________


    My posts are not financial advice, just a rambling guy passing time on a coffee break.
    The team at Bespoke Finance offers advice, including Limited Company Buy-to-Let , HMO Conversion and Cheap Life Insurance.

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