LTV question???

[waterwonder]

Morning all,

How is the vale determined I.e. Is it the price paid or a independent valuation by the mortgage co? For example if you manage to steal a house for 10% less than its value could you then get 90% LTV mortgage without putting any cash in?

Just curious as i'm currently saving to get in the 10-20% range as a consequence savings + rent is currently in £1500 range and will keep increasing. Ignoring deposit requirements the mortgage repayments on a suitable house would actually be less.

Thanks

[eliot]

mortgage company requests a valuation survey.

[waterwonder]

So it could work? or will it be the lower of price paid or valuation?

[princeperch]

no it wont work - you have to put some cash in and you wont get a 100% mortgage unless you are in negative equity (from previously taking a 100% mortgage) and you need to remortgage.

[Sarnie]

The price you agree to purchase the property for is largely irrelevant. If your looking at a 90% product then they will only lend you 90% of whatever they value it at, not what you agree to pay for it.

For example, if you agree to buy a house for £110k and the mortgage company value it at £100k then you will need to find an extra £10k to give to the vendor or convince them to reduce the price down to £100k. Whatever happens, the lender will only lend you 90% of £100k.

[waterwonder]

But that is my point, the buz word always seems to be 'LTV' not 'Loan to purchase price'.

For sake of argument lets say i can afford the repayments on a c£250k mortgage i see a property that is advertised at £265k and the mortgage co valued it at the same. The vendor however is keen to sell, and as a first time buyer i'm chain free so i buy it at £250k. Putting £12.5k in cash would mean i require a mortgage of £238k which conveniently is 90% of the original valuation.

Does this mean i then qualify for a 90% LTV mortgage or am i missing something? If i would qualify, can this be taken the logical extreme of zero cash.

I had always assumed that you needed a % of the purchase price but as i've been doing my periodic look at the market prices and mortgage rates and the LTV bit got me thinking.

I'm not in desperate rush, at least while the market is flat and i would always put as much cash in as possible but if all is not as i thought it may review my 2012 budget .

[waterwonder]

Sarnie said:

The price you agree to purchase the property for is largely irrelevant. If your looking at a 90% product then they will only lend you 90% of whatever they value it at, not what you agree to pay for it.

For example, if you agree to buy a house for £110k and the mortgage company value it at £100k then you will need to find an extra £10k to give to the vendor or convince them to reduce the price down to £100k. Whatever happens, the lender will only lend you 90% of £100k.

Thanks, i had assumed this would be the case but is the opposite true as per my example above?

[craigjm]

In my experience it is very rare for a mortgage company upon purchase to value the property at more than the sale agreed price. I have never seen one value it higher, lower maybe but higher no. The % you put in is a symbol of your commitment in the banks eyes and values are always conservative.

[waterwonder]

Thanks, so in reality it is usually the lower of purchase price or mortgage valuation.

...More saving required then, it's just a shame that we're "wasting" £900 a month on rent in the process, ho hum, life could always be worse

[wcel]

LTV will always be against the lower figure, whether that is the valuation or the actual purchase price

[Sarnie]

waterwonder said:

But that is my point, the buz word always seems to be 'LTV' not 'Loan to purchase price'.

For sake of argument lets say i can afford the repayments on a c£250k mortgage i see a property that is advertised at £265k and the mortgage co valued it at the same. The vendor however is keen to sell, and as a first time buyer i'm chain free so i buy it at £250k. Putting £12.5k in cash would mean i require a mortgage of £238k which conveniently is 90% of the original valuation.

Does this mean i then qualify for a 90% LTV mortgage or am i missing something? If i would qualify, can this be taken the logical extreme of zero cash.

I had always assumed that you needed a % of the purchase price but as i've been doing my periodic look at the market prices and mortgage rates and the LTV bit got me thinking.

I'm not in desperate rush, at least while the market is flat and i would always put as much cash in as possible but if all is not as i thought it may review my 2012 budget .

The short answer is, no.

When you submit a mortgage application, you will have already agreed a purchase price, which you tell the mortgage company. You don't see a house for £265k, apply for a mortgage based on a purchase price of £265k and then negotiate with the vendor. You can't use anything you get knocked off the advertised price as your deposit

You see a property
Negotiate a price with the vendor
Apply for the mortgage based on your agreed purchase price

In that order.

[aka_kerrly]

Blimey £900pm rent, that is around what you would expect to pay on £175,000 over a 25year repayment basis.

For reference there are some building societies, Cambridge, Scottish, Bath, Newbury, Ipswich and Shepshed offer 95% LTV mortgages at rates around 4-6% which is surprisingly competitive.

[waterwonder]

aka_kerrly said:

Blimey £900pm rent, that is around what you would expect to pay on £175,000 over a 25year repayment basis.

For reference there are some building societies, Cambridge, Scottish, Bath, Newbury, Ipswich and Shepshed offer 95% LTV mortgages at rates around 4-6% which is surprisingly competitive.

Yup, don't worry that is not lost on me hence the original question. Unfortunately not much i can do about it, i've got to live somewhere.

[waterwonder]

Thanks all, might have to introduce some spending cuts next year

[craigjm]

waterwonder said:

Thanks all, might have to introduce some spending cuts next year

Have a look at some of the building societies that AKA mentions. The longer you rent the longer you are wasting money that isn't benefiting you.

[waterwonder]

I will thanks AKA.