LTV v Loan to Purchase Price

das_tard

hi, this is my first post - i have been trawling through the very helpful forums for an easy to my query but proved unfruitful. therefore, here goes:

i have accepted an offer on my house which is less than the purchase price paid 4 years ago but after solicitors fees, estate agents fees etc, we should come out of it with approx. 8k to put down on our next house. so far, so good.

however, the property we attend to purchase is my parents house for 115k to 120k. this property has been valued at 135k so they are selling to me for less than market value. i am aware that 8k will not be enough to secure a deposit for 115k.

my query therefore is: can a mortgage company not take the market value as collateral against the money to be borrowed? e.g. i will need to borrow 107k for 115k purchase price. can the mortage company use 107k as a percentage of 135k?

i am cuurently with C&G on SVR of 2.5% and have held back overpaying to contribute more to the initial deposit. they have suggested that they can port the existing mortage and keep on SVR and add an additional top up mortgage of 115 - 87 (current outstanding) = 28k to which i can put 8k towards the 28k. this secondary mortgage would be on a fixed rate of 5.09%. has anyone ever come across these products? they have also offered a combined fixed for 107k but at a higher rate.

with the regard to the above, are there any issues with regard to selling a house below market value? i am aware that inheritance tax, laundering could be assumed but my parents are not near the threshold for inheritance tax so is this still an issue? or is it a formality just declaring it to the solicitor at purchasing stage?

any help would be appreciated given that i would rather know any problems now rather than further down the line when i have initiated surveys, searches etc.

regards

MarkyMarkD

Most lenders will calculate LTV on the lower of purchase price and market value. That's because they want to see YOU putting in the relevant percentage, not you getting it for free through a "discounted" price.

There should not be any other issues with selling at an under-value.

Why don't they simply sell it to you at its fair value, and give you a gift of the difference? Can you not get a mortgage for the relevant percentage of £135k on your income?