Callum is buying a new-build for £300,000. The developer gives him a £12,000 contribution towards costs and £5,000 of carpets and appliances, all declared on the UK Finance Disclosure of Incentives Form. His lender deducts all incentives from the price if they exceed 5% of it, and lends up to 90% LTV. What is the maximum loan?
Incentives total £17,000, which is 5.7% of £300,000 and over this lender’s 5% threshold, so it treats the price as £300,000 − £17,000 = £283,000 and lends 90% × £283,000 = £254,700 (UK Finance Disclosure of Incentives Form; Walbrook (formerly LIBF) MRT1 AC11.2, requirements of lenders). £270,000 ignores the incentives, £256,500 deducts only the £15,000 at the 5% threshold, and £268,200 deducts only the £2,000 excess.
Ignoring builder incentives when working out the lender’s view of value.
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