LTV/Mortgage Advisor Query

b0rker

How does this work?

You approach a Mortgage Advisor and provide him with the following details.

House bought for £100,000 in March 2007 on a 2 year fixed

Looking to re-arrange March 2009.

Have £28,000 in savings so would be 80% LTV at March 2007 price.

Ask Mortgage advisor to find us the best 5 year fixed that he can.

How can the MA find us the best 5 year fixed if he does not know what the mortgage company will value our house at now and therefore cannot possibly know the actual LTV?

Without knowing the LTV the MA would surely have to approach loads of mortgage providers and we would need to get surverys done by all of them to get an accurate idea of the best deal on offer.

Clearly not financially acceptable.

So would the MA just have to guess which mortgage provider would both value our home at the highest amount (improving our LTV) and also offer the best interest rate to secure us the best possible deal?

If it is just guess work then why use an MA at all other than obviously they will/should have easy access to ALL of the interest rates/fees if they are whole of the market.

silvercar

You can look at prices achieved on similar properties more recently or use an online calculator to value the property.

At the end of the day you will tell the advisor what you think the property is worth. If you feed rubbish data in, you get rubbish data out. You tell the MA your home is worth 20% more than it is and he'll recommend a mortgage that you won't be able to get. Mortgage advisors know about mortgages not values.

b0rker

silvercar wrote: »

You can look at prices achieved on similar properties more recently or use an online calculator to value the property.

At the end of the day you will tell the advisor what you think the property is worth. If you feed rubbish data in, you get rubbish data out. You tell the MA your home is worth 20% more than it is and he'll recommend a mortgage that you won't be able to get. Mortgage advisors know about mortgages not values.

So essentially I call the shots on what I think the property is worth?

Surely that takes a lot of the work out of the deal?

I can guesstimate what my house is worth and arrange the mortgage myself no?

So essentially the value of the house is guesstimated whether I use and MA or not? Then with that guesstimate you can roughly work out what the LTV will be. Then you try and arrange the best rate/fee deal you can that is within that LTV guesstimate and pray that the mortgage provider will agree with your guesstimate?

All seems a bit flimsy to me. With LTV being so importnat these days it would be nice if it were a tad less flimsy. Like the remortgager gets one valuation done (like in a HIP) and all banks have to agree to honour the value of the house from that valuation for one month. That gives the remortgager one month to arrange a new deal and if they cannot then another valuation will be required which will of course be valid for one month.

Then again that would be sensible and this is the UK housing market we are talking about!

dunstonh

So essentially I call the shots on what I think the property is worth?

Surely that takes a lot of the work out of the deal?

That isnt the role of the mortgage adviser. You tell them what you think. You can ask them if they think your prices is realistic and if its an experienced mortgage adviser they can offer an opinion. It will only be an opinion though.

If you are sailing a bit close to the wind on a deal an experienced mortgage adviser will know what lenders are perhaps running tighter criteria than others.

I can guesstimate what my house is worth and arrange the mortgage myself no?

You can. Doesnt. mean the lender will agree with you though.

All seems a bit flimsy to me. With LTV being so importnat these days it would be nice if it were a tad less flimsy.

Unless your house has a price tag on it with a guaranteed sale price how do you propose it can be done any differently. Houses are an asset class that change value. They are only as valuable as what someone is willing to pay.

Like the remortgager gets one valuation done (like in a HIP) and all banks have to agree to honour the value of the house from that valuation for one month.

open to abuse. The lender is going to what their approved valuers doing it on their criteria. Your criteria for the HIP may be estate agent price. Whereas the lender will want realistic for quick sale price (in a falling market).

Then again that would be sensible and this is the UK housing market we are talking about!

it has its flaws, as do all systems, but it actually works quite well. The biggest problem is that consumers tend to over price their own house.
Not necessarily an issue in a rising market as values will be priced with that in mind. In a falling market though it really does show.

feisty1

silvercar wrote: »

Mortgage advisors know about mortgages not values.

Many experienced, competent mortgage advisors have a good understanding of the market value of properties as this is what they do on a daily basis and most importantly they normally have a working relationship with surveyors who they consult with..............

Ian_Griffiths_Halifax

feisty1 wrote: »

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and most importantly they normally have a working relationship with surveyors who they consult with..............

Jesus you talk some cr4p some times.

The majority of brokers will meet a surveyor at the local Business Networking Club or a Trade event.

The majority of brokers who have a working relationship with surveyors are packagers.

koexelek

b0rker wrote: »

So essentially I call the shots on what I think the property is worth?

Surely that takes a lot of the work out of the deal?

I can guesstimate what my house is worth and arrange the mortgage myself no?

At the end of the day, it does matter a jot wha you or your broker think the property is worth.
The only person's opinion that is going to matter is the surveyor's, appointed by the lender.

b0rker

koexelek wrote: »

At the end of the day, it does matter a jot wha you or your broker think the property is worth.
The only person's opinion that is going to matter is the surveyor's, appointed by the lender.

That is exactly where my problem with this lays though.

So by using a mortgage advisor I am not garunteeing myself the best deal which is exactly what I would expect to be doing by using an MA.

I do appreciate that it is not the MA's job to value the property but as that is the case then the MA cannot ensure that he can get me the best deal.

The lack of specific knowledge of the value of the house before the process of applying for the mortgage restricts both an MA and myself from securing the best rate/fees package as it clouds the issue of which mortgage provider to make an application to.

It is like me going into a shop to buy some beans where none of the food is priced and having to take all the brands of beans to the counter and pay to have them valued and then choosing which ones offer the best quality/price ratio. That wouldn't work in the supermarket so I am not sure how it is allowed to 'work' in the housing market.

This was obviously a lot easier to deal with 2 years ago as we were first time buyers so the price/value of the house was set by the seller. Also the LTV was not paramount in 2007 as it is now.

By the way I don't have a probelm with MAs/IFAs etc and am 95% sure I will be using one when I come to remortgage.

herbiesjp

b0rker wrote: »

Without knowing the LTV the MA would surely have to approach loads of mortgage providers and we would need to get surverys done by all of them to get an accurate idea of the best deal on offer.

Clearly not financially acceptable.

A MA would not make multiple applications to get a property valued - there would be no reason to. It could potentially damage your credit file.

If there was a slight difference in the value needed the MA would help you to appeal the figures. As basically you would only apply for 1 mortgage i.e. the best one to suit your needs and circumstances so the MA would do everything to try and get that one agreed for you.

Failing that, they could try the next best lender in the list, but with no guarantees their surveyor would come back with a different result - the lenders may even use the same surveyor.

"not financially acceptable" - well if the deals had incentives like free valuation, and no up front fees to pay, there would be no financial disadvantage to you anyway.

b0rker

Okay an example:

Mortgage provider A is offering 5% on a five year fix at 75% LTV
Mortgage provider B is offering 6% on a five year fix at 80% LTV
Mortgage provider C is offering 7% on a five year fix at 85% LTV

We owe £72,000 on the mortgage.

We guesstimate my house to now be worth £90,000.

That would give us an LTV of 80%.

We apply to mortgage provider B as we guesstimate that we are in the 80% LTV range. Mortgage provider B comes back and says that they have valued our house at £96,000 which would have us at a 75% LTV. Mortgage provider B does not do a good 75% LTV deal.

We have wated a valuation fee/time, are there other expenses?

We would now like to approach Mortgage provider A to get the 75% deal they are offering. We do that. They value the house at £84,000 giving us an 85% LTV. there 85% LTV deal is not as good as Mortgage provider C.

More fees and time builds up.

Am I making a vlaid point here or am I just confussed?

It seems like a very inaccurate science to me.

I would have thought that approaching an MA would take the confussion out of this situation but if they are not going to touch guesstimating my properties value with a barge pole as you suggest then I am kind of left on my own with this one?

herbiesjp

You would then use the survey from lender B to appeal against lender A

That is assuming the lender in question gives you a copy of the basic mortgage valuation to appeal with.