BristolUK

I occasionally see houses for sale with a cashback from the seller on completion.

If a house is for sale for $150k with $7k returned to the buyer for repairs etc. why not just sell the house for $143k?

What's the advantage?

Surrey Expat

Seems they are trying to be cute and figure if the auto industry do it then it must work and attract buyers. I for one can see no logic or point to it.
You could also end up paying property transfer tax on the full purchase price!

BristolUK

And the seller paying more in commission too. Oh, and maybe more CGT if it wasn't the seller's main residence.

destinationnovascotia

If people are stretching themselves for their mortgage and putting every bit of savings into their deposit it is a way of having a bit of cash at the end to do a few things such as buy curtains or appliances.

eg. $200k purchase price with $10 cashback

Buyers are getting a 95% mortgage on $200K. They will have $10K deposit, mortgage for $190K and have say $10K cashback to spend

If they get 95% mortgage on $190K they will find $8500 deposit, mortgage for the rest and no cash back. They only end up with $1500 of their savings left as an initial spend. This can be important to some people.

BristolUK

That explains it. Thanks.

Bit of an anti-climax though.

Surrey Expat

So another way of buying something they can't afford.

destinationnovascotia

Yep

Purley

I work in a solicitor's office part time, and the full time secretary told me that the government have done away with 40 year mortgages and zero down mortgages as of some date in August.

I would think that is a step in the right direction. To me it seems completely dishonest to encourage people to buy a house they can't afford. But on the other hand, its total stupidity to be talked into doing that!

dbd33

I have a mortgage I don't expect to be able to pay off. If that's the situation you're thinking of then it seems defensible to me. By having a mortgage and paying it rather than paying rent I have more control over the property, I can paint it, extend it, keep animals in it, whatever, without having to ask the landlord. It may be that the value of the property increases and I can use the capital in some way. I don't think one has to be able to own a property outright in order to make "buying" it a reasonable course.

Jingsamichty

I'm sure whoever lent you the money rather expects you to pay it off one day.

The main point is that you shouldn't be encouraged to borrow more than you reasonably can afford to regularly pay back. The trouble occurs when people can't afford to make the regular repayments... not necessarily the capital sum.

Nothing wrong with 40 year mortgages in my view... if you're willing to consider paying the extra interest over a longer period, then inflation will almost certainly make the extra 15 year payments insignificant.

dbd33

I don't imagine the bank cares, surely what they want is cash flow and interest. Certainly when I paid off the mortgage on a previous house the bank was keen to lend the value of it back to me.

club_biscuit

agreed. I find the bank likes me most when I take out another mortgage and likes me least when I pay it back! If they don't lend the money, they don't make the money, at least for part of their business.

btw, I didn't know there was a 40-yr option - darn and now it's gone! I've often bought property without any intention of paying it off, in fact I've gone "interest-only" - pretty much the same in the first year anyway- for a number of short term investments to optimize cash-flow. horses for courses, I guess.