Doing an extension - new valuation of house is very low causing problems with LTV

JosephCoyle

Hi Guys

Maybe the mortgage brokers can help with this.

My wife and I have had plans passed for an extension to our existing house (3 bed semi) which will turn it into a 4 bedroom with 3 receptions, new garden garage, patio etc.

We have agreed with a contractor a price (85k) to do the extension.

We currently have a mortgage of £170k on a house we purchased for £190k in 2005. We had the house valued in early 2007 at 300k for a change from variable to lifetime discounted variable mortgage.

So we hoped to borrow the 85k from the bank (that we are presently with).

Note as well that we have a long term buy to let with the same bank over the last 5 years with less than 60k left on it.

The bank have came back indicating that the house is worth £190k at present and £230k after the extension!!

Therefore they are saying they can only lend (230*0.8) = 185k minus the existing mortgage 170k = 15k!!

The survey was a drive by and I am livid with the surveyors for their foolish estimation. While I realise the market has slowed I feel that surveyors are now valuing houses at much smaller amounts to try and stimulate buying in the market - which is fine but this is an extension.

We are both 2 highly paid professionals with 30k+ savings. Although I don't want to tempt fate, we are both secure in our jobs due to our profession and the type of work we do. The bank has admitted this by saying that affordability is not the problem - the only thing is the survey.

I have requested that the bank instigate another survey (a walk in and examine the house not drive by).

Any advice from anyone out there.. we really want to get this done asap due to the slow down in the building market and we have secured a fantastic price for the transformation to the house.

Any suggestions welcome.....

My wife is ready to cry!

silvercar

What is the BTL worth? If there is enough equity and the rental high enough you could remortgage that, take the equity released to pay for the extension.

JosephCoyle

silvercar wrote: »

What is the BTL worth? If there is enough equity and the rental high enough you could remortgage that, take the equity released to pay for the extension.

Yeah I've thought of that - BTL could be worth 130-150K

But if things turn out like before they might only value at 100k!

If we assume (130k *0.8) = 104k it might leave us some room but not enough, plus I have no doubt the bank would put us on a high interest rate BTL mortgage for what we borrow.

Sir_Humphrey

Or else, your house may be back to being worth 190k. Of course, larger places will also have got cheaper, so presumably moving would be an option. Don't shoot the messenger.

hoggums

This "My house MUST be worth more than that" is exactly the denial that is going on in the housing market that is preventing houses from selling and will mean declines will last for another 2 years at least.

I can't see how you can justify your house increasing by over 30% in 2 years from 05-07. Based on current house price falls I think you have been given a very generous valuation at 190K and I think you would be lucky to find a buyer at that price.

Just be thankful your house isn't yet worth LESS than you paid for it.

If you want an extension - save up for it - you are both on good wages.

daveb975

I guess it depends whereabouts in the country you are located. In my area (SW London/Surrey borders), typical asking prices seem to be back to the levels that they were in 2004. Also, house prices here did not rise 60% between 2005 and 2007. A lot of the places that hit rose quickly during the last couple of years of the boom are the ones going down quickest now.

Vaulations in 2007 tended to be very high by certain EAs/valuers on account of the fact that people were clammering to get their hands on houses at any price at that time.

Have a look at recent sold prices for similar houses on your road. In my experience, a lot of these 'drive-by' surveyors just take the last sold price and apply a % to it to cover the likely change in value since the sale date.

feisty1

hoggums wrote: »

This "My house MUST be worth more than that" is exactly the denial that is going on in the housing market that is preventing houses from selling and will mean declines will last for another 2 years at least. I can't see how you can justify your house increasing by over 30% in 2 years from 05-07. Based on current house price falls I think you have been given a very generous valuation at 190K and I think you would be lucky to find a buyer at that price. Just be thankful your house isn't yet worth LESS than you paid for it. If you want an extension - save up for it - you are both on good wages.

and Why are you not taking advice rather than asking for brokers to help you on here, effectively you're looking for free "advice", is that how much yr financial commitment means to you.............

JosephCoyle

Guys - thanks for the telling off - and thanks to all the replies who are getting something off their chest - i don't need a telling off - I wanted peoples advice based on experience and I thought this was a forum for advice.

Just to be clear.

I want the bank to accept that the LTV rate they are offering me is too small.
I know what my house is worth (prob 180-190k) at present, I know it was never worth 300k and I'm glad its not worth less.

However, what I want the bank/surveyor to recognise is
a) turning a house from 3 bedroom to 5 bedroom with 3 bathrooms will cause a property to rise
b) How can a surveyor make a judgement on a 5 minute drive buy
c) why did the banks lend people on 15k a year 6-8 times their salary to buy a house and won't let myself and my wife at 2.5 times get an extension which is badly needed in a area we love.

To the people who posted
'Fiesty - Believe you me I know fin commit - I thought this was a discussion forum??? I thought I'd gauge views. You sound like my father.
'Hog' appreciate the advice but i am not that niave around 'my house must be worth more than this' - I was just merely stating facts
Dave b - thanks a million - best post of the lot

Best of luck everyone

P.S We have savings which we could use but we'd rather kit out the house with it - looks like we'll get it built first with savings and borrow later.

inca_2

This isn't a broker's forum nor does it charge for registration. You seem to be forgetting that this is a consumer focused website and whilst many brokers do come on here and give extremely helpful and valuable contributions, they do this voluntarily. A person is entitled to come here and ask for help from anyone, if you begrudge using your knowledge to help others for free then why are you posting here? not all advisors here are brokers either.

inca_2

I'm not trying to be confrontational here but how can you 'know' for sure what your house is worth? Have you had any other valuations done at all? I'm not saying you're wrong, I have no idea where you are etc but just wondered how you have arrived at your valuation and how you are so positive about it.

and306

A couple of years ago when i was re-mortgaging, the new company did a drive buy valuation and the they didn't value you the house at what i would have expected compared to other houses in my area.I phoned them up and asked for a proper valuation ie inside the house and they valued it at £15,000 more.It might be worth phoning up and asking them to do a proper valuation,not sure what would happen with the current credit climate,hope this helps