remortgage undervalues property

shapeshifter42

My girlfriend is trying to remortgage her 1 bed apartment, the main reason being that she is stuck in a horrendous 5 year deal paying 6.99% fixed. It was bought in Autumn 08 as a new-build for around £86K, although 25% of this was a gifted deposit from the developer.

Not being sure of its current value, she wisely didn't want to just go straight ahead with a remortgage application and risk losing hundreds of pounds if it failed due to an under-valuation. Instead she went to a local estate agent under the pretence of looking to sell. The valuation came back at £110K, which is what we had estimated ourselves based on similar local properties.

It's worth noting that not a single flat in her block has been re-sold yet. Also, if you go on a site like Zoopla you will see a huge range of buying prices for essentially the same flat types as some people bought at the peak in 2007 and for full market value, and others also got gifted deposits or equity shares, housing association etc.

Anyway, she applied for the mortgage and a valuer was sent out. He was in the flat for literally 2 minutes. The up-front fees were paid, then we got the news last night that the valuer had put a price of just £88K on the flat. My girlfriend is devastated and is refusing to pay several hundred pounds for a 2 minute valuation that was so far short of the mark.

Any suggestions? Please be nice as it's my first post (although I'm a long-term newsletter reader).

beecher2

I'm not at all surprised that the valuation came back close to the 2007 figure. She has to pay for the valuation, regardless of whether she is happy with the result or not I'm afraid. Looks like she's going to have to stay on the fixed rate and try to save/overpay enough to get the LTV down to 90% when the 5 year deal is up. This will save her having to pay an ERC too.

Brock_and_Roll

and the valuer will be well aware that lenders absolutely loathe 1-bed flats at the moment!

shapeshifter42

So what other options are available then? I didn't like to say initially, but the main reason to remortgage other than the horrendous 6.99% interest rate is that my girlfriend has big debts, and remortgaging at the first valuation price would wipe those out. As long as she has those she has no way of over-paying on the mortgage. Besides, any extra money she might have would be better spent on non-mortgage debts.

_Andy_

No mortgage lender is going to value it anywhere near the ridiculous figure the EA has provided.

Cannon_Fodder

Perhaps, if with knowledge of the local market, you believe the £110k to be achievable she should sell to clear her debts ?

Other practical options for eliminating debt can best be pursued on the debt-free wannabee forum.

shapeshifter42

Yeah, selling is the only option we can think of, but....

Would it be possible to extend the size of the mortgage with the existing provider if they approve something closer to the original valuation? Yes it's 6.99% and would add £200 to the monthly mortgage pament, but this is tiny compared to loan and CC debts and payments

_Andy_

shapeshifter42 wrote: »

Yeah, selling is the only option we can think of, but....

Would it be possible to extend the size of the mortgage with the existing provider if they approve something closer to the original valuation? Yes it's 6.99% and would add £200 to the monthly mortgage pament, but this is tiny compared to loan and CC debts and payments

Possibly but highly unlikely to get a valuation anywhere near what you're after

beecher2

Can only suggest going onto the Debt Free Wannabee forums, posting a Statement of Affairs and tackling the debt issue.

Brallaqueen

Things are not the same as they used to be and properties are not all worth the same they used to be. The valuation came back as what she paid for it (more, even) and in this climate this is a good valuation!

Has your girlfriend looked at sold prices for around her area (I understand the block itself has not sold on)?

Has she made any improvement to this new build flat that would make it worth more than she bought it for?

Can she get more free valuations from other estate agents? If 5 valuations ALL say £110k, the she might be on to something.

shapeshifter42

We did check the local market prior to getting the first valuation, and that first valuation was from a reputable local agent.

No improvements to flat as was already a new build.

I think she said lender would only accept a valuation from their chosen estate agent. We are tempted to go to them in person and ask for a valuation posing as sellers. If they don't pick up on it, we either get the same guy and quiz him on his valuation, or we get someone else who may value it somewhat higher and then we have a leg to stand on.

As far as consolidation goes, my girlfriend very sensibly put all her CC debts on 12 months 0% cards last month in case she didn't get the remortgage, but there is a loan too that cannot be overpayed, only paid off in full