Developer paying mortgage incentive - additional mortgage before discharging existing

[englishbob]

Hi, long time lurker, first time poster. We are looking at trading up to a new development which has an incentive to buy whereby the developer will pay your mortgage for a period. The estate agent suggests that because the mortgage is covered for this period you can get an additional mortgage for the new property on top of your existing mortgage on your existing house (despite the fact that this would mean total borrowings far in excess of normal multiples/affordability of salary). The purpose of this is that you can purchase your new house and sell your old house at your leisure. I have a view on the ultimate risk with this process. Putting that aside, can anyone see how this would work in practice?

 

[tiger]

Take everything the estate agent says with a pinch of salt, they're trying to shift the property. I suggest you talk to your own bank or other mortgage providers first. If you do decide to sell "at your leisure" you'll need to plan for the possible overlap of 2 mortgages.

 

[spinal_tap]

Re: Developer paying mortgage incentive - additional mortgage before discharging exis

So, the developer will pay your mortgage for a certain period.

It's a con as far as I'm concerned. Say for example, the mortgage payments the developer will make will add up to 10k. That's still 10k extra on the capital of your mortgage, and therefore it'll cost you more in the long run.

You'd be better off asking him to drop the asking price by 10k ... less of a mortgage to repay.

Study all these "offers" very closely indeed!

 

[JohnBoy]

this may be a foolish question but do 'extras' such as these count as part of the overall purchase price of the property and as such attract stamp suty?

 

[z109]

Re: Developer paying mortgage incentive - additional mortgage before discharging exis

this may be a foolish question but do 'extras' such as these count as part of the overall purchase price of the property and as such attract stamp suty?

Not as such.

But you are effectively paying for the kit-out/mortgage subsidy in the price of your house, so you are paying stamp duty on it. If you got the 20k kit-out value off your purchase price, and the house was due stamp at 5%, you effectively save 21k!