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Is it still possible to do No Money Down deals? |
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At 4 Walls, we are of the opinion that, since April 2008, there are now no LEGITIMATE ways to construct no money down deals with the present mortgage products.
Why? It's very clear:
If the discount or incentive is NOT disclosed to the lender, it is MORTGAGE FRAUD - plain and simple.
In any property transaction, there must be total transparency so that all parties know how the deal is being constructed.
Additionally, if you are not disclosing discounts (i.e. having the gross price put on the contract and having the property valued at the gross price), then you are also defrauding the Land Registry and the Inland Revenue and opening yourself up to some SEVERE problems, should you ever be audited. Make no mistake, these are criminal offences.
With one in six property investors set to be audited in the future, it is only a matter of time before these fraudulent deal structures are exposed. I like to sleep at night so I personally will not entertain doing this type of deal, until I research one that is legitimate.
I hope those people claiming big cash backs through "commissions" realise that they will be TAXED on that money as it is technically income. If you are audited by the Inland Revenue I hope you are confident that the money trail will stand up to scrutiny?
If a company is offering you a "no money down" scheme, please ask to have it in writing so that you can have it independently approved and verified by the Council of Mortgage Lenders and/or the Law Society. You could also run it by your lender for their approval. If it is a legitimate scheme, the company offering it to you will have no problem with providing this information. However, I think you will find that they are unwilling to provide you with this information. That should tell you all you need to know.
A further nail in the coffin of no money down is the news that, from the 1st September, all developers have to complete a form provided by the CML that states any incentives or discounts offered in the deal. This form has to be copied to the lender and both solicitors involved in the transaction.
Whilst this is only applicable to new builds, I am sure it will not be long before this becomes the case with second-hand property.
Also, please be clear that BMV and NMD are not the same!
Buying below market value is obvious. I buy everything BMV - cars, holidays, houses etc. I'd be daft not to!
NMD is a separate issue. Yes, you need to buy BMV to achieve it, but the two should not be automatically linked.
Of course, it is up to you whether you purchase in this format, but please at least be aware of the legal, tax, and financial implications of doing so.
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