LTV Deposit.

dale4837

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 ??

Mr_Matey

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.

moneysavinmonkey

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

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.

dale4837

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

moneysavinmonkey wrote: »

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?

moneysavinmonkey

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?