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Policy
Definition of Incentives:
- Builders may offer sales incentives to potential buyers to encourage them to purchase their property.
- An incentive is anything the builder gives or provides to the buyer in cash or goods. Typical examples are deposits (i.e. builders deposits) paid before completion and cash paid after completion - often to pay stamp duty or legal fees.
- As all incentives must be paid for by the builder, they can be regarded as a less transparent alternative to reducing the sale price.
Assessment of Incentives
Financial incentives of up to 5% of the purchase price or valuation (whichever is the lower) are allowed on New Build properties only and are permitted on any New Build. Any application where the financial incentive value exceeds 5% will be declined, regardless of the LTV.
The financial incentive % may affect the maximum LTV allowable, as explained below:
- Where the financial incentive amount is <= 2% then there is no impact on the maximum LTV allowed.
- Where the financial incentive amount is >2% (up to a maximum of 5%) then the maximum LTV will be reduced by 5%. For example, if the maximum LTV normally allowed was 95%, but the property had an incentive >2% then the maximum LTV available for that case would be reduced to 90%.
The Customer must be able to provide a minimum of a 5% deposit (a builder deposit can be accepted in addition to this but not in place of the customer’s own deposit). The only exception to the above is Track Record. As the minimum LTV must be over 95% to be eligible for Track Record Mortgage, financial incentives of more than 2% are not accepted for this product.
Evidence
- All incentives must be declared at DIP stage. The UK Finance Disclosure of Incentives form (formally CML incentive form) is required by the valuer, which provides details and value of any incentives.
- Valuers take incentives into account when preparing the valuation report. Please note that all lending is always subject to a satisfactory valuation for mortgage purposes.
- We will work off the lower of the valuation or the purchase price.
- Evidence of the deposit may be requested at application stage.
The Society does not accept applications where:
- The builders/vendors are paying above market value for a part exchange property.
- The application has any form of Vendor (Private Seller) deposit funding.