Ready to Buy a New Build? They Have a Present for You!

The crisis in housing market has been obvious for more than a year, and the situation in the new-build sector has been especially poor. To make people buy new homes developers had to create new strategies, spending money on different extras. But these extra benefits are often not worth the deal in whole. Apart from offering cash backs, financing deals and added extras developers now are ready to help you with selling your old house, but only on condition that you buy a new one from them. As many house owners find it difficult to accomplish the deal themselves in the current market, this service from developers seems to be popular. Moreover, house sellers also offer to cover the costs of stamp duty, mortgage protection insurance, deposits, mortgage repayment subsidies and so on. The kind of offer depends on the area in which each property is located and on the expected buyers’ needs. So if you are going to buy a new-build and can get a mortgage, you can choose from a variety of incentives. All financial incentives such as deposits or mortgage payments, offered by the developer, can be of use only when you have a big deposit. This is a result of a new transparency policy which was introduced by the Council of Mortgage Lenders. Now, all incentives offered to the buyer have to be declared by the seller in a special form. This innovation was made in September 2008. Before that time, no incentives or benefits had to be declared, which caused problems for lenders because they didn’t know if the borrowers used their own money when they concluded the deal. Thus the true value of property was difficult to evaluate when a buyer could use for his/her deposit on a 90 per cent loan-to-value (LTV) mortgage £10,000 received as an incentive for £100,000 mortgage. It became even more important now, when the market is in decline. Now sellers must declare every extra incentive which helps the mortgage lender understand correctly what the purchase price is. Both seller and buyer benefit in this situation as they know the basis of the sale. Another side of this innovation is the fact that now mortgages will be calculated against the purchase price minus the value of the incentives package, and not against the official purchase price. For example, a house with a £100,000 purchase price and a £10,000 cash back would be valued at only £90,000. Nowadays, facing the crisis in credit market, 100 per cent mortgages are no longer available for customers. Mortgage companies forbid developers to pay deposits for their customers, and these companies limit deposit to 5 per cent or don’t allow anything at all. Another way to purchase a new-build is a shared-equity deal, which is inevitable if a buyer doesn’t have equity or cash deposit. Shared-equity market is growing steadily now, and lenders don’t object to it, even though in this case the developer retains part of the property and offers this portion for sale to the buyer at a later date. It’s very likely that the system of extras and benefits will survive current crisis as it’s designed to help people buy new houses, no matter what economic situation is on the market. Another key to success is that the system must be tailored to what the customers need. However, those extras and incentives shouldn’t define the choice of the prospective buyer who is to look at a deal objectively.