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austrianec

Taylor Wimpey 100% Mortgage 'Springboard'

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I notice Taylor Wimpey are offering would-be buyers with no deposit, the following...

https://www.taylorwimpey.co.uk/buying-with-us/special-offers/springboard

...it seems as though they gift the home-buyer a 5% deposit after 2 years 'renting' the property, enabling the buyer to buy the property

I imagine the process is legitimate (and not mortgage fraud) because Taylor Wimpey aren't a normal 'landlord' and can claim they're effectively giving you the house 'for free' for 2 years and keeping the money in trust for you as a buyer (just like people living rent-free with their parents). Within 2 years, the prospective buyer will have paid 5% of the house's value in 'rent' and it's perfectly possible this goes straight into an escrow account to which a mortgage from the bank can be added should the purchaser sign on the dotted line after a couple of years.

It's certainly intended to allow buyers to buy with no deposit as it appears thus in the corporate presentation:

Employment

Mr Smith – Trainee doctor current salary - £30,000

Mrs Smith – Legal graduate - £25,000

Financial situation The customers have no savings Customers renting a property for £1,025 Monthly income Mr - £1,750 Monthly income Mrs - £1,500 Other outgoings - £1,600 Surplus income - £625

Income required to purchase a £250k property with a 95% mortgage is £55,000 (jointly)

Note the 4.5x salary mortgage. On the plus side, it does say it can't be used in conjunction with Help-to-Buy...

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Handy hedge against falling house prices for the builder. They wouldn't do this if they thought the house would be worth more in a few years time.

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6 minutes ago, Si1 said:

Handy hedge against falling house prices for the builder. They wouldn't do this if they thought the house would be worth more in a few years time.

Not sure I agree. 

"What happens if I don’t want to buy my home at the end of the rental contract?

At the end of the 5 year fixed rental contract, you can either buy your home or renew your rental contract for another 5 years. If you don’t want to stay in your home at the end of your rental contract, you can move on."

In other words, the optionality sits with the renter. If house prices fall, the tenant can walk away. But if house prices rise, they can exercise their option to buy and lock in a profit. 

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2 minutes ago, Ah-so said:

"

In other words, the optionality sits with the renter. If house prices fall, the tenant can walk away. 

If house prices fall they can walk away and lose that juicy deposit.

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3 hours ago, Si1 said:

If house prices fall they can walk away and lose that juicy deposit.

But if house prices have fallen MORE than said deposit they would be walking away or wanting a fat discount on the original price I think.

 

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Just now, SavingBear said:

But if house prices have fallen MORE than said deposit they would be walking away or wanting a fat discount on the original price I think.

 

There's no way the builders will honour the rental-deposit contact AND give them a price reduction.

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3 hours ago, Si1 said:

If house prices fall they can walk away and lose that juicy deposit.

It's not really a deposit as it was the cost of rent. 

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It would appear that this option doesn't fix the price in any way so the option itself has limited value other than perhaps buying at an independent valuation rather than Taylor Wimpey's made up price.

 "if you serve notice to indicate you wish to take up the option to buy, Taylor Wimpey will within [1 month] arrange three independent valuations with the average being the option purchase price."

 

"The 5% discount is taken off the option purchase price and is only available between 2-5 years of the tenancy agreement."

So having a look at this they "give" you the 5% deposit at the end, They are giving it as a discount on the purchase price rather than as any kind of cash payment. Not sure how this would work with getting a mortgage. Also:

"Springboard cannot be used in conjunction with any other offer (including Help to Buy)."

Having a look at the properties available they are asking for £284,950 for a 2 bed "apartment" with the rental listed as from £900PCM so about a 3.8% yield for them. *against the current price*

 

I think when we start to see this deal come up at more and more developments it'll be a sign that they're really struggling to shift these even at 95% LTV. 

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A convoluted scheme with the potential for many unforeseen outcomes. Anything but reduce the price. Looks increasingly desperate. 

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Its hard to see any real advantage other than security for the renter.  Having said that, many of us renters would appreciate some security.  Its got a nasty, built in annual rent rise plus the option to purchase an overvalued property; when you look into it, its a pretty shabby deal.  As other posters have already said, its hard not to see this as a nuanced form of desperation on behalf of the builders so I am seeing this as another sign of the impending collapse.

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The option to be taken roughly from behind.  When looking potentially at your first house clear thinking doesn’t really enter into the decision, neither does trying to open one of your veins.

 

 

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12 hours ago, Ah-so said:

It's not really a deposit as it was the cost of rent. 

It is if they're allowed to use it as a deposit. It's a sink cost I agree but one the builder can use as persuasion.

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22 minutes ago, Si1 said:

It is if they're allowed to use it as a deposit. It's a sink cost I agree but one the builder can use as persuasion.

True. But if the price of the home being offered is too high (it probably will be), then they can pull out. The builderwill then be left with a used home that it would have to sell at a relative discount. 

Although you could argue that after renting for 5 years you would have paid 25% of the value of the property anyway. 

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22 hours ago, austrianec said:

I notice Taylor Wimpey are offering would-be buyers with no deposit, the following...

https://www.taylorwimpey.co.uk/buying-with-us/special-offers/springboard

...it seems as though they gift the home-buyer a 5% deposit after 2 years 'renting' the property, enabling the buyer to buy the property

I imagine the process is legitimate (and not mortgage fraud) because Taylor Wimpey aren't a normal 'landlord' and can claim they're effectively giving you the house 'for free' for 2 years and keeping the money in trust for you as a buyer (just like people living rent-free with their parents). Within 2 years, the prospective buyer will have paid 5% of the house's value in 'rent' and it's perfectly possible this goes straight into an escrow account to which a mortgage from the bank can be added should the purchaser sign on the dotted line after a couple of years.

It's certainly intended to allow buyers to buy with no deposit as it appears thus in the corporate presentation:

Employment

Mr Smith – Trainee doctor current salary - £30,000

Mrs Smith – Legal graduate - £25,000

Financial situation The customers have no savings Customers renting a property for £1,025 Monthly income Mr - £1,750 Monthly income Mrs - £1,500 Other outgoings - £1,600 Surplus income - £625

Income required to purchase a £250k property with a 95% mortgage is £55,000 (jointly)

Note the 4.5x salary mortgage. On the plus side, it does say it can't be used in conjunction with Help-to-Buy...

What happens if the buyer can't get a mortgage after two years renting? 

They always roll out this kind of desperate creative silliness just before the top of the market. It's a sign that prices are unaffordable.

People would be better off actually renting and then actually buying in a couple of years for a lot less money...

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5 hours ago, Ah-so said:

True. But if the price of the home being offered is too high (it probably will be), then they can pull out. The builderwill then be left with a used home that it would have to sell at a relative discount. 

Although you could argue that after renting for 5 years you would have paid 25% of the value of the property anyway. 

Agreed.

I wonder if the rental costs are rather, er, expensive, too.

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In the example, the rent for 2 years will be over £25,000 (assuming CPI over 1%) so, on a £250k house, that's a 5% rental yield which I'd say is very high for non-housing benefit rentals

High enough that it isn't overly generous to 'give' 5% back after 2 years (leaving aside the fact your house is probably over-priced by people using HTB round the corner)

The only thing I wonder though is whether independent valuations would factor in any damage done to the property; if so, that could be one way of securing a bigger discount. As the builder has already established the couple in question don't have any savings, they wouldn't have much recourse against a 'bad tenant'. If there is a garden, it certainly wouldn't be worth mowing the lawn!

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This is just like a credit card: fine if you pay your balance every month, terrible if you don't. Here the catch is you're signing up on a 5 year contract and it appears you get a fixed 5% discount if you buy after 2 years or 5 years. Willing to bet a large fraction don't have the means to buy it after 2 years.

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anything that makes it easier for the feckless to buy will be a roaring success and quickly drive prices of said properties sky high.

Same with new build help to buy, those are easily 30-40% overpriced now, to the point that its instant negative equity when its time to sell. 

It all works well until prices again tip over the affordability level for mortgages etc. 

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I think this may also be a clever way of reclaiming the VAT. Normally properties built to let are unable to reclaim input VAT. Wondering if this is a sale to a letting/future purchase company and that may allow developer company to claim the VAT.

I'll need to look into it. ... and the purchase mechanism. 

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  • 259 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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