Lenders Valuation

Leory

This probably sounds silly to seasoned house buyers but i am a FTB and a little confused on the lenders valuation.

I know that the lenders will only borrow what they value the house at, and not more.

Does this mean that if the sale price was £100,000 and they valued the house at £95,000 they would only lend £95,000?
Or does it take deposit into account
e.g I had a 10% deposit so i would only want to borrow £90,000 and their £95,000 valuation would be ok?

sorry if that is a little confusing, but all help is appreciated

Annisele

The 'value' in the 'loan to value' calc that lenders do is the lower of their valuation and the actual sale price.

Assuming your lender is prepared to loan 90% of the value, it would work a bit like this:

Actual sale price: £100k
Lender's valuation: £95k
Maximum the lender would lend: £85.5k (i.e. 90% of £95k)
Cash that you'd have to stump up: £14.5k (the difference between the actual sale price and the maximum the lender will lend), plus money for legals/survey/assorted other costs.

So no, you wouldn't be able to borrow £90k on a £95k valuation (assuming a 90%LTV mortgage).

And also, no, it doesn't sound silly - far better to ask now then realise just before exchange that you don't have enough money!

Middlers

They will only lend upto their %LTV. If house valued at £95k and their %LTV is 80% they would lend £76k. So long as they can get their money back if things go wrong then they will be happy. If %LTV was 80% you would need a 20% deposit (£19k). If you had to sell at a loss that loss would be yours and not theirs, ie they get first pickings. Not sure if this answers your question or not.

Leory

Thanks for the answers guys!

when i think of LTV it does make sense that it is a % of what they value it at.

I guess this can be where gift deposits fall down - the price is in effect over inflated and can lead to a lower valuation by the lender.

poppysarah

Gift deposits are pointless - like you say they are faked by mixing the prices about.