buying property (scotland)- LTV & offers over

[malks222]

sorry if this a bit of a rambling post, but starting the process of looking for my first property to buy with my gf. I've spoken to the PH resident mortgage advisor about rough affordability/ maximum lending, level of deposit etc..... and fairly comfortable with that.

but at the moment I'm kinda struggling with the Scottish system of 'offers over' and the effect this has on borrowing and ultimately 'Loan to value'. I'm looking at various places around Edinburgh city centre and most property is advertised at 'offers over' and wondering if anyone knows how much you should offer?

for example, theres 4 places I've seen recently:

- offers over £395k (home report value £500k)
- offers over £455k (home report value £500k)
- offers over £445k (home report value £490k)
- fixed price £415k (home report value £425k)

now I completely understand the 'value' of something is only whatever someone is willing to pay- but in the first example the home report says the property is worth £500k, if I were to get an offer accepted of £450k (no chain for me and the sellers need to move quick as they have another property they want to buy), does this become the new 'valuation' of the property for mortgage valuations?

so I have £50k deposit- I approach a lender and say I want to borrow £400k against this £500k property (80% LTV) or do they say £400k against £450k property (roughly 90% LTV or 'Loan to Purchase Price')???

[anonymous-user]

Hello, although not in Scotland when I bought my last house I paid significantly under the value.

After the bank survey who valued it at X, the actual purchase price was 80% of X, I spoke to the bank about the exact same situation and was told "its the valuation or purchase price, whichever is lower".

[drainbrain]

malks222 said:

sorry if this a bit of a rambling post, but starting the process of looking for my first property to buy with my gf. I've spoken to the PH resident mortgage advisor about rough affordability/ maximum lending, level of deposit etc..... and fairly comfortable with that.

but at the moment I'm kinda struggling with the Scottish system of 'offers over' and the effect this has on borrowing and ultimately 'Loan to value'. I'm looking at various places around Edinburgh city centre and most property is advertised at 'offers over' and wondering if anyone knows how much you should offer?

for example, theres 4 places I've seen recently:

- offers over £395k (home report value £500k)
- offers over £455k (home report value £500k)
- offers over £445k (home report value £490k)
- fixed price £415k (home report value £425k)

now I completely understand the 'value' of something is only whatever someone is willing to pay- but in the first example the home report says the property is worth £500k, if I were to get an offer accepted of £450k (no chain for me and the sellers need to move quick as they have another property they want to buy), does this become the new 'valuation' of the property for mortgage valuations?

so I have £50k deposit- I approach a lender and say I want to borrow £400k against this £500k property (80% LTV) or do they say £400k against £450k property (roughly 90% LTV or 'Loan to Purchase Price')???

The latter. Loan against price or value, whichever is lower.

[Ransoman]

Keyword here is VALUE.

Whatever the house is valued at is what the LTV is calculated against. It doesn't matter how much your offer was.

Source: Homeowner in Scotland. My Mortgage payments have gone down as my home was revalued to a higher value and that dramatically lowered my LTV percentage.

[Sarnie]

drainbrain said:

malks222 said:

sorry if this a bit of a rambling post, but starting the process of looking for my first property to buy with my gf. I've spoken to the PH resident mortgage advisor about rough affordability/ maximum lending, level of deposit etc..... and fairly comfortable with that.

but at the moment I'm kinda struggling with the Scottish system of 'offers over' and the effect this has on borrowing and ultimately 'Loan to value'. I'm looking at various places around Edinburgh city centre and most property is advertised at 'offers over' and wondering if anyone knows how much you should offer?

for example, theres 4 places I've seen recently:

- offers over £395k (home report value £500k)
- offers over £455k (home report value £500k)
- offers over £445k (home report value £490k)
- fixed price £415k (home report value £425k)

now I completely understand the 'value' of something is only whatever someone is willing to pay- but in the first example the home report says the property is worth £500k, if I were to get an offer accepted of £450k (no chain for me and the sellers need to move quick as they have another property they want to buy), does this become the new 'valuation' of the property for mortgage valuations?

so I have £50k deposit- I approach a lender and say I want to borrow £400k against this £500k property (80% LTV) or do they say £400k against £450k property (roughly 90% LTV or 'Loan to Purchase Price')???

The latter. Loan against price or value, whichever is lower.

^ Correct.

[Muncher]

Ransoman said:

Keyword here is VALUE.

Whatever the house is valued at is what the LTV is calculated against. It doesn't matter how much your offer was.

Source: Homeowner in Scotland. My Mortgage payments have gone down as my home was revalued to a higher value and that dramatically lowered my LTV percentage.

Surely the valuation is clearly wrong, as the valuer is the figure someone would pay on the open market for it, which you have just done.

You can't value something at £600k, market it and sell it for £500k but say its value is still £600k, it clearly isn't.

[drainbrain]

Muncher said:

Surely the valuation is clearly wrong, as the valuer is the figure someone would pay on the open market for it, which you have just done.

You can't value something at £600k, market it and sell it for £500k but say its value is still £600k, it clearly isn't.

A super-accurate way to value any property is to find the underbid (losing bid) at auction or in an 'offers over' scenario. At that point that's what the winning bidder knows the property would fetch if he immediately returned it to the market.

The rest of it is one man's (valuation surveyor's) opinion of moonlight - often based on recent similar sales, which is just as often very difficult (or impossible) data to obtain.

[malks222]

thanks all, I had assumed it was based on the purchase price and not just a paper valuation of the property, otherwise we'd be no better off than when they were offering 125% mortgages!

[NickCQ]

Ransoman said:

Keyword here is VALUE.

Whatever the house is valued at is what the LTV is calculated against. It doesn't matter how much your offer was.

Source: Homeowner in Scotland. My Mortgage payments have gone down as my home was revalued to a higher value and that dramatically lowered my LTV percentage.

You are conflating two different issues. During the lifetime of the mortgage, you can get the home revalued or indexed to move you between LTV pricing bands. On purchase it is difficult to convince a lender that the property is worth far in excess of what you paid for it. The other point is that risk for the lender is related not solely to their attachment point on the collateral but how much equity the borrower has put into the deal (or skin in the game).

If you buy your property valued at £500k for £400k and get a mortgage of 80% LTV (for the sake of argument), then you have actually put no equity in. Therefore your risk profile to the lender is very different to your usual 80% LTV borrower who has 20 points of equity in the deal to try and protect.