How incentives affect mortgage

[jk154]

Hi All

I am a FTB with a valid AiP for £400k (along with my £40k contribution) in hand. I am interested in a newly built 4 bed detached with an asking price of £390k.

I have an intention of offering 10% below the price tag as follows

1. 5% cash back
2. 5% on extras

This development is in its initial stage and progression is quite slow. Found out that it's financial year ends on 31 December as well.

My question is how these incentives affect on agreed mortgage if they all are granted by the developer.

I don't know whether I am risking my mortgage (in fact my deposit) by negotiating incentives as same size as my contribution. If so how best I can grab some incentives alternatively please?

Your kind advice is highly appreciated. Thank you in advance!

Not sure what you’re asking?

What ever way you are looking at it, you’re paying over the odds based on inset Ives, cash back is money added to your mortgage over 35 years plus interest - you’re not gaining anything.

Extras are worthless as new builds lose money anyway as no longer ‘new’ so will need replacing when selling.

Thank you. Sorry for the confusion.

I have seen somewhere that lenders can reduce the extra amount the developer would agree (after a successful haggle) as incentives by making a lower LTV.

If that's that case how possibly bag some incentives without affecting the mortgage terms? Any similar experiences or any advise would be very much appreciated.

Thanks!

Pp is right about newbuilds losing their value once you buy them, so mortgage companies are rightly more cautious

The 5% cash back is in reality a 5% discount but one that you have to pay stamp duty on. It just serves the company to be able to inflate their average sold price with you paying the additional to massage their numbers.

So the mortgage company will almost certainly reduce the value they give by 5%, which will affect your LTV accordingly

If you are set on a new build, your best bet is probably to haggle hard on the extras they throw in - better floors, worktops etc rather than get anything that counts as a buying incentive

There will be a section on the mortgage application where you have to declare incentives and kickbacks, but if you negotiate better extras as part of the purchase, those wouldn’t have to be declared
It varies from lender to lender though eg Santander definitely have much more complex applications for new builds than other lenders

Might be worth speaking to a broker before you proceed with a specific lender

Appreciate your kind advice