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warrior88

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8 hours ago, warrior88 said:

Saw this in facebook, 5% towards deposit.

Why not reduce price? Probably as it impacts sales price and HPI calculation. 

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Nah, if you have no deposit you can't get a mortgage and can't buy (even if you have good income). This lets people buy who couldn't do normally. Reducing the price by 5% wouldn't have the same effect. 

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I may be reading this wrongly, but it looks like an attempt at mortgage fraud. Is that 5% to be considered as (part of) the deposit when talking to your bank?

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me and the wife were looking at taking on a big DEBT on a newbuild about eight nine years ago the buliders then were offering 'gifted deposits which I couldn't get my head around at the time, asked the agent to explain it to me which he couldn't do, basically said you don't need to worry about what it is or how it works because you're just the mark

 

it was something along the lines of the house 'sells' for £300k but you only pay £240k because the builder gifts you £60k

 

my questioning was along the lines of "so where exactly is the £60k?"

"so the asking price is £240k not £300k then?"

"can I have the £60k in premium bonds rather than cash?"

 

needless to say thanks to this site we didn't buy the house and its probably now asking £450k with no gifted deposit in sight

 

 

 

 

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I remember this from the 90s crash. The gifted deposit keeps the numbers going to the Land Registry high so valuations on other properties in the development are not affected. There's probably a stamp duty downside which did not really exist in the 90s though, especially if you are into a new band thanks to the "gift".

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1 hour ago, Nationalist said:

I remember this from the 90s crash. The gifted deposit keeps the numbers going to the Land Registry high so valuations on other properties in the development are not affected. There's probably a stamp duty downside which did not really exist in the 90s though, especially if you are into a new band thanks to the "gift".

It would be interesting to see if correction actually happens - seems like off plans flat are just not selling!

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6 hours ago, Nationalist said:

I remember this from the 90s crash. The gifted deposit keeps the numbers going to the Land Registry high so valuations on other properties in the development are not affected. There's probably a stamp duty downside which did not really exist in the 90s though, especially if you are into a new band thanks to the "gift".

Some businesses ie developers/hotels etc have certain covenants in their loan agreements.

For example say you have a development of flats worth 400k each in your application with a honking great loan against them.

The bank may say that the said flats need to have a value of x lest the loan be called in for breaking the deal.

I distinctly remember viewing a chain of small hotels where the owner who I know showed me he never missed a payment on his loans....just the market for hotels collapsed ergo the value dropped 40%+ and it was called in.  from that day on I always watch out for those type of clauses.

The property equivalent of a Margin Call.

So if these developers are up to their eyeballs in debt + they thought their prices would be 20% higher this year 2017 then say 2014 they may not actually be able to reduce... if they did it would at a stroke make that the price of all the other apartments > leading to ruin

 

Edited by Fromage Frais

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16 hours ago, Fromage Frais said:

Some businesses ie developers/hotels etc have certain covenants in their loan agreements.

For example say you have a development of flats worth 400k each in your application with a honking great loan against them.

The bank may say that the said flats need to have a value of x lest the loan be called in for breaking the deal.

I distinctly remember viewing a chain of small hotels where the owner who I know showed me he never missed a payment on his loans....just the market for hotels collapsed ergo the value dropped 40%+ and it was called in.  from that day on I always watch out for those type of clauses.

The property equivalent of a Margin Call.

So if these developers are up to their eyeballs in debt + they thought their prices would be 20% higher this year 2017 then say 2014 they may not actually be able to reduce... if they did it would at a stroke make that the price of all the other apartments > leading to ruin

 

Yes that is probably true, so both Bank covenants (Debt) and HPI to blame

 

 

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17 hours ago, Fromage Frais said:

Some businesses ie developers/hotels etc have certain covenants in their loan agreements.

For example say you have a development of flats worth 400k each in your application with a honking great loan against them.

The bank may say that the said flats need to have a value of x lest the loan be called in for breaking the deal.

I distinctly remember viewing a chain of small hotels where the owner who I know showed me he never missed a payment on his loans....just the market for hotels collapsed ergo the value dropped 40%+ and it was called in.  from that day on I always watch out for those type of clauses.

The property equivalent of a Margin Call.

So if these developers are up to their eyeballs in debt + they thought their prices would be 20% higher this year 2017 then say 2014 they may not actually be able to reduce... if they did it would at a stroke make that the price of all the other apartments > leading to ruin

 

you just described the entire housing "market"

 

smoke and mirrors

 

but mainly just DEBT, lots and lots of DEBT

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  • 406 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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