'Sitting Tenant' discount on mortgages???

newteacher1

Hi Everyone,

We're looking for a bit of advice.

To give you an overview of the situation, our landlord went in to administration and we've been told that we will have an opportunity in the near future, to buy the property. The property was valued but the surveyor said that they expected the property would sell for approximately 10% below the value if it was sold privately and by 15% if sold as part of a portfolio.

On speaking to a mortgage advisor at Lloyds TSB, we were told that as we have been tenants in this property, we would most likely be eligible for a "sitting tenant" deal. They said that they would use the original property value provided by the surveyor and would then provide a mortgage to the value they would expect it to sell for based on the fact that the property is now in the hands of an administrator.

At first it was impled that we wouldn't have a deposit to pay, but as the conversation progressed, we were then lead to believe that it may mean that our we still require a deposit but it is reduced.

It is worthwhile noting that on the mortgage illustration, the valuation is as per the administrator's survey value. However, the mortgage value is 20% less than the value of the property.

What we're looking to find out is whether or not anyone ever heard of this particular deal? If so, can you please explain what it means? The brief explanation we've been given so far, combined with the mortgage illustration, has only confused us.

Any help that you can provide would be greatly appreciated.

girleight@

Do they just mean you might get the house cheaper as you already live there and it would be easier to sell to you rather than evict you to sell to someone else?

Pincher

It's to do with Loan to Value.

In a fire sale, a £100k (market value) house could be auctioned off for £70k, or sold off any way the administrators can. Assuming there is nothing really wrong with the house, and the administrators are willing to sell to the tenants at £90k, and Lloyds TSB values the house at £100k, you can borrow £90k and call it a 90% LTV mortgage, with no cash deposit.

Obviously, a 90% LTV mortgage would be at a higher interest rate,
so you should put in £15k cash deposit, borrow £75k, which is 75% LTV, and get a lower interest rate.

Lenders don't like people who can't put a few thousand pounds together, it makes them nervous. I know you want to live heroically, and die magnificently free diving into a blazing volcano with no possessions to hold you back: that's what makes them nervous.