LTV and valuation question

spy

I need to remortgage soon and was planning going with First Direct who will only lend up to 80% LTV. When I bought 2 years ago I borrowed about 87% so will need to reduce the amount I borrow. What I am not sure about is how I know when I apply what 80% of the value is. So if I say apply to borrow 80% of what the flat was worth 2 years ago when I bought it but then they value it lower what will happen? Will they reject my application or offer me 80% of what they value it at?

shell1000

I think the best thing to do first is check the prices of properties that have actually sold in your area recently, its better to compare with like properties.

Im currently in the process of remortgaging to first direct on the 80 percent ltv deal, but be warned that you have to pay 300 reservation fee up front and the survey fee, which if internal (to maximise value) costs about 180.. if the ltv is more that 80 they would be well in their rights to not progress with the mortgage and you may lose your fees.

I went with nationwide initially and found out my loan to value was 76.67 and nationwide wouldn't budge from their ltv rates.. so i would do a bit of homework first.. im sure there is also a website out there that can give you a rough value of your property price in a bad market, fair market and good market (the moment being bad) which seemed not far off for me, valued my place as 175 when the valuer said 180.

Goodluck, they are not easy decisions to make

Locoblade

Im not advocating this as a guaranteed solution as I don't know if/how it would work, but if you want to go with FD you could consider applying for the lifetime offset tracker with no fees, then if the valuation comes back negative you haven't lost anything. If its successful you could then speak to them a about changing your application to a fixed rate with fees, obviously you'll have to pay those fees but at least by that time you'd know they'll accept you.

hydsta

They will go to 80% LTV on a current valuation of the property. Because you initially borrowed at 87%, the likelihood is, with house prices dropping, your LTV will be much higher now, possibly into the 90's. You will have to pay more to get it down to 80% than you would of done 2 years ago in order to get their deal.

spy

Thanks for the advice guys.

I probably could borrow 80% but the problem is I don't know how much to apply for as I don't know what they will value the property at. If I applied for say £160k and they said 80% of the value was £155k then would they let me put in the extra £5k and lend me £155k or just reject the application?

Locoblade

Why not give them a call and ask....

On the form you fill in what you think the house is worth and the current loan value, I suspect that figure needs to be under 80% otherwise they'd reject the application straight away, or call you and offer you the SVR offset mortgage which has an LTV of 90%. Assuming you put a figure under 80%, if the valuation comes back less than your estimate and you fall above 80% LTV, I suspect they'd do the same, call you and say you can only apply for the standard SVR mortgage. At that point you'd need to ask them if you can make up the capital shortfall.

InMyDreams

We should have been well within the 80% limit but our valuation came back with a typo (£175K instead of £275K). Despite our salary multiple also being high, they came back with an offer that was exactly 80% of the typo which was about £6K short of what we had asked for (£140 instead of £146). Even then they said that there would be ways around this, for example lending us the £146 but insisting on a minimum payment equal to a repayment mortgage rather than an interest only which is what the FD mortgages are unless you choose to pay more. In the end the valuers agreed that it was a typo and we could have the choice, but if you are planning to pay the mortgage like a repayment mortgage anyway then it wouldn't make much difference. We just wouldn't have had the complete flexibility until the capital amount was below the 80% level.

I don't know what experiences other have had from FD if their valuations have come up a bit short, but that's what happened to us back in Feb of this year.

spy

Thanks InMyDreams, that's reassuring. I guess if I go for the fee free tracker anyway then it reduces the risk too

jiggy2

hi spy, i had a similar query (remortgage is still a few months away) and would like to hear if the fee free tracker would be the best way to get the valuation and then to move to fixed if valuation is good...so if possible keep us updated.

thanks

atlantis187

Just a couple a questions people regarding a First Direct remortgage.

If I go for the fee free tracker option how soon can I switch to a fixed rate?
To save on fee's if valuation doesnt come upto 80% is this the best way of going about it?

How much is the valuation fee and closure fee from direct direct?

Can I pay a lump sum in order to get it to 80% LTV?

If I get my own valuation done by an estate agent i.e reeds rains or blundells will first direct valuation be similar price?

How long does a first direct applications take for a remortgage?

My current 2year fixed deal with Royal bank of scotland ends on 30th Nov 2008.

They have offered me a deal at 5.45% with fee of £3499 added to the mortgage for a 5 year fix.

Is this better than compared to first direct 5 year fixed?

Outstanding loan amount is £148000

Locoblade

Just a "couple" of questions there

Anyway, to answer them, Ive just succesfully applied for the FD lifetime tracker, and I asked on the phone if there was a minimum time before switching to say a fixed rate, and they said there was no limitation.

I assume you can pay a lump sum if your valuation comes over 80% LTV, would need to ask them to confirm.

An external "drive by" valuation fee is zero for the lifetime tracker, £99 if you go with the fixed. If you want/need a more thorough valuation then there is a fee, £299 I think for a full survey but may be wrong. Exit fee is £150 IIRC, you can confirm all these fees on their website though.

Valuation variations - who knows. I guess estate agents are likely to be more "optimistic" with prices as the higher the price they sell at, the higher their commission, whereas surveyors working for a lender are likely to be more cautious to protect their client's investment. When I applied the lady did say was I confident on my valuation because recently they have had cases where the valuation has come through 20% lower than the applicant thought it was worth. This may just be optimism on those people's part but maybe its a sign that estate agents are asking unrealistic figures in certain areas.

Application times - we sent our application a week ago Friday and received notification of acceptance 4 working days later! We don't complete until end of October so I don't know the minimum time for the whole process to go through though (solicitors, exchange of money etc). They say 8-10 weeks to process the whole lot but I can't imagine it taking that long given how quickly they've turned round our application.

Regarding your offer from RBS, how long is left on your mortgage as that will to a certain extent determine which is going to be cheaper?