PLEASE READ BEFORE POSTING: Hello Forumites! In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non-MoneySaving matters are not permitted per the Forum rules. While we understand that mentioning house prices may sometimes be relevant to a user's specific MoneySaving situation, we ask that you please avoid veering into broad, general debates about the market, the economy and politics, as these can unfortunately lead to abusive or hateful behaviour. Threads that are found to have derailed into wider discussions may be removed. Users who repeatedly disregard this may have their Forum account banned. Please also avoid posting personally identifiable information, including links to your own online property listing which may reveal your address. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

LTV Deposit.

Hi All.

All constructive advise is welcomed !!

Im looking at buying a new house and renting my old one out !!

I looked at a repossesed house, theyre asking 109,000 I have offered 105k. The value of the home is 140k its on a new build site where similar properties are still for sale at 159k ? realistically its worth 140k

I have been told that if the property is worth 140k and you pay 105k that means you have 25% Immediate equity ?

meaning you now dont need a deposit ????


I have spoke to the broker at the estate agents, doing the above is fraud !! ?? Yet i know some people that do it this way ??

Comments

  • Mr_Matey
    Mr_Matey Posts: 608 Forumite
    I think you still need a deposit. It's only "worth" what you both agree as the price.

    So if that's £105k, then you need a deposit on that figure.
  • I think what you are meaning that you have heard people do is BMV (Below Market Value) which used to exist before the property crash.

    Basically you buy the property below market value (somehow!) you need to have a deposit (ideally all the cash upfront to get a good deal) then after you have brought the property you get a valuation done and can get a mortgage based on the actual market value.

    e.g.
    buy house for 150k with 15k deposit (90%) mortgage,
    similar properties 'apparently' selling at 200k.

    After completion you get valuer around, values the property at 200k,
    you can now increase your mortgage from 135k to 180k (still 90%)
    so you gets you 15k back and another 30k on top...
    you also now have a bigger mortgage.


    but...
    Since the property crash mortgage valuers are a lot more pessimistic and won't believe that you got a bargain. if you paid 150k they will take that as the market value, also mortgage finance is harder to get (especially for BTL) so you will probably only be able to get a 70% mortgage and the fees are astronomical...

    sorry, this get rich quick scheme is a non-starter in the present climate.
  • mlz1413
    mlz1413 Posts: 2,989 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    When the survey is done for the lender the surveyor will value the house at the price they consider it is worth that is the figure the mortgage company lend on. So if your surveyor says it is 'worth' £100,000 then your lender will offer £75,000 at 75% LTV.

    A surveyor is highly unlikely to value it at more than the purchase price which has to be advised to them.

    I think the fraud bit would be advising the lender that you are paying £159k and not £109k for purpose of receiving a higher mortgage.
  • I understand what your all saying, And I agree.
    I do know 2 investors / developers, that do this i.e

    house worth 100k
    pay 60k
    40 % equity or ltv of 40% thus no deposit ! but both are on holiday till end of month ? so i cant ask them ?

    are they yanking my chain or doing something they should not !

    Only thing i can think of is they have a lender that will lend at 100%rate ????
  • zedyy
    zedyy Posts: 149 Forumite
    I think what you are meaning that you have heard people do is BMV (Below Market Value) which used to exist before the property crash.

    Basically you buy the property below market value (somehow!) you need to have a deposit (ideally all the cash upfront to get a good deal) then after you have brought the property you get a valuation done and can get a mortgage based on the actual market value.

    e.g.
    buy house for 150k with 15k deposit (90%) mortgage,
    similar properties 'apparently' selling at 200k.

    After completion you get valuer around, values the property at 200k,
    you can now increase your mortgage from 135k to 180k (still 90%)
    so you gets you 15k back and another 30k on top...
    you also now have a bigger mortgage.


    but...
    Since the property crash mortgage valuers are a lot more pessimistic and won't believe that you got a bargain. if you paid 150k they will take that as the market value, also mortgage finance is harder to get (especially for BTL) so you will probably only be able to get a 70% mortgage and the fees are astronomical...

    sorry, this get rich quick scheme is a non-starter in the present climate.


    Thanks for this post.

    Who will you get the "30K" back from?
  • zedyy wrote: »
    Thanks for this post.

    Who will you get the "30K" back from?

    not sure what you mean sorry! Can you phrase the question a different way?
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 350.4K Banking & Borrowing
  • 252.9K Reduce Debt & Boost Income
  • 453.3K Spending & Discounts
  • 243.4K Work, Benefits & Business
  • 598K Mortgages, Homes & Bills
  • 176.6K Life & Family
  • 256.4K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.