Mortgage Valuation Error

stevecos

Hi, I am in need of some urgent advice please!!
Me and my wife bought a new build property as first time buyers that was originally up for sale at £225,000 but managed to agree a deal rather easily with the builders (Barratts Homes) for £217,000.
After signing and committing to buy at this fee we received the mortgage valuation from Abbey dated before we signed but actually received nearly a month later stating they valued the property at £200,000. After speaking to the solicitors and mortgage advisor, we were advised not to worry about this but conveniently we had to use Barratts recommended solicitors and mortgage advisor for the deal to go through. Now after seeking independent mortgage advice (as our 2year fixed rate ended) we have been told Abbey should not have given us a 100% mortgage for the full amount of £217,000 as they never believed the property to be worth this. The value of our property has now dropped to £185,000 therefore losing a sum of £32,000 rather than £15,000. We wondered if anyone else has found themselves in this situation and whether they could recommend a solicitor to use or how to approach this matter.

Thanks for any help and/or advice

Freddie_Snowbits

It is called negative equity! What a house is worth is what you could get for it the day you sell. You bought at £217,000 2 years ago.

Since that time we have had a bit of a rocky ride, so its percieved value now is less. This is not a problem, if you are not intending moving and are paying the mortgage.

I would get an independat valuation, just ring any estate agent and say you want to sell!

Radiantsoul

I can't really see the problem. The value of the house has just fallen.
I am not sure who you can blame in this. Abbey can presumably lend to their hearts content, there is nothing to stop someone lending more than the value of an asset it is secured against. The solicitors don't seem to have done anything wrong either.
Perhaps you could sue the valuer, but it is going to be hard to do.

I think your best bet is to stay on the standard variable rate.

stevecos

The negative equatity isn't the problem, its the fact that we were given a mortgage by the Abbey for more than they valued the property at and when seeking hwlp and advice about this were palmed off with 'not to worry about it' by solicitors and mortgage advisors recommended by the builders. We understand the fact we are in negative equatity but wondered if we could do anything about the fact we were given a mortgage for more than the property was worth at the time of buying.

Thanks.

surreybased

Hi,

Sadly it's a reasonably common situation as OP says, lots of people are now in negatve equity due to house prices decrease from 2 years ago. When did you buy and what deposit did you put down? From the post I'm assuming it's a 100% mortgage (although in reality if it was valued at £200k but you bought at £217k it was over 100%). Are you happy in the house? Do you need to move? If not then I guess the challenge will be getting a competitive mortgage with that LTV. Are you in a position to overpay?

One think to check is what did the paperwork say? I'm guessing the solicitors and advisor put everything in the paperwork but just did not highlight it all to you :mad:. Sadly the saying 'buyer beware' is likely to apply.
If you can stay n the house and get a sensible mortgage rate, then over the very long term you'll get through this.

stevecos

yes it is ment to be a 100% mortgage but as you say it works out being more than this. We were hoping to move but having to pay back the negative equatity then followed by a 15% deposit on a new property this really isn't a viable option for us. The other problem we have is we were sold our property under false promises. The devlopment was ment to be finished before we moved in 2 years ago and work is still ongoing and a parade of shops including health centre and nursery were supossed to be built but now the land where these we ment to be built is up for sale, leaving us feeling duped and even conned. :mad:

beecher2

You paid more than the house was worth - that was fairly common a couple of years ago. You made the decision to proceed even though you knew the valuation details. I don't understand what outcome you hope to achieve - all you can do is save/overpay to get yourself out of negative equity, and then save up a deposit for a new place. You bought a new build at the peak, which was unfortunate, but such is life.

You could go onto the Debt Free Wannabe forum and post a Statement of Affairs to get advice on cutting back on expenditure in order to get yourself out of this situation - ditch Sky/gym membership/holidays for the foreseeable future

stevecos

Ditch Sky, are you Crazy?!? :rotfl:Thanks for all your help people!! Just felt like we'd been taken advantage of as first-time buyers thats all, and the people we asked for and needed help from didn't provide any!
Cheers :beer:

beecher2

stevecos wrote: »

Ditch Sky, are you Crazy?!? :rotfl:Thanks for all your help people!! Just felt like we'd been taken advantage of as first-time buyers thats all, and the people we asked for and needed help from didn't provide any!
Cheers :beer:

Seriously think you should look at your finances carefully, as you're now stuck on the SVR with no hope of getting a new mortgage deal. When rates go up, you have no options and with such a large mortgage, each rise in the base rates is going to hurt.

dunstonh

Just felt like we'd been taken advantage of as first-time buyers thats all

You havent been.

You borrowed a large amount of money with no deposit to buy an asset (the house that fluctuates in value.

That value has dropped below what you paid for it. New build houses are typically overpriced and lose around 10% straight away. Then you have to factor in the drop in house prices.

You havent actually lost anything. On paper, the value has changed but you are not selling up so you are not going to realise that loss. Over the next 20-30 years you can expect 2 or 3 more times when house prices have a large drop.

At this point with mortgage rates so low (your mortgage payment on SVR could be as much as 50% lower than the long term average) you should be aiming to over pay the mortgage to reduce the amount borrowed down quicker and protect yourself from higher mortage payments when the mortgage rates go back to aroung their long term average. You will also buy yourself out of negative equity doing that as well.

Typhoon2000

Mortgage companies used to routinely provide more than 100% mortgages (helps with renovation, furnishing, spare cash etc) in the hay day. Nothing wrong with this at all, as long as you aware of how much you were borrowing and what the flat was worth at the time. There is not obligation for a lender to provide only a maximum of 100%, they can lend anything they want.