Help with my first mortgage please!!

jonnyboy21

Hi everyone, just after a bit of advice really please. I am about to buy a house for 52000 pound off my mother and father. the house was valued at 70,000 by the estate agent. i applied for a 55000 mortgage as i have 7000 saved up and wanted to make that 10000 to help with some work that needed doing, like an extension and a new kitchen. however when the mortgage company have valued the house they have said t is only worth 65000. This now means that if i want the 55000 i will need to pay a higher interest rate as the equity has gone under 80%.

So basically i can either go for 55,000 and pay 300 pounds per month with an interest rate of 5.69%, or just get 52000 which covers the cost of the house, and pay 275 per month at a ate of 4.95%.

Both mortgages will be fixed for two years.

Which one should i go for really? ive heard that a mortgage over 5% at the minute is really poor, but i was thinking if i get the extra money and get the entension done then in 2 years the house will be worth more and then i will have more equity so will get an even better mortgage then.

please help, sorry for the essay.

Jonny

JA1000

It will cost you an extra £600 in two years, what's the rush to do anything? An extension is hardly urgent and in the current market would it really make that much of a difference. What is the SVR after two years?

What you should be doing is getting a mortgage for £45k using your deposit getting an even lower interest rate you should be able to get sub 3% on this LTV and then SAVE to do up kitchen etc, this site is full of people who rushed in to doing the kitchen etc and are all now heavily in debt.

TrickyDicky

I get the feeling you're not quite clear whats going to happen.

They will value the house at the market value (65k) or the purchase price (52k) whichever is LOWER. So in reality, to get a rate at 80% LTV you will only be able to get a mortgage for £42k if you go ahead with the purchase at the price you suggested. You cannot use extra percieved value as a deposit.

Im afraid you are going to have to save up or get a loan for any further improvements.

happybroker

TrickyDicky wrote: »

I get the feeling you're not quite clear whats going to happen.

They will value the house at the market value (65k) or the purchase price (52k) whichever is LOWER. So in reality, to get a rate at 80% LTV you will only be able to get a mortgage for £42k if you go ahead with the purchase at the price you suggested. You cannot use extra percieved value as a deposit.

Im afraid you are going to have to save up or get a loan for any further improvements.

Not so, if this is placed with the correct lender OP will be able to borrow 100% of the £52k and have the purchase price at £65k due to the fact that OP is buying from family.

Thrugelmir

happybroker wrote: »

Not so, if this is placed with the correct lender OP will be able to borrow 100% of the £52k and have the purchase price at £65k due to the fact that OP is buying from family.

Are all lenders content to do this, in view of the implications of selling assets at under market value?

VIGILANT22

This is known as a "concessionary purchase"