What happens to mortgage if I negotiate a drop in price?

milliebear00001

Would I have to apply all over again/have another valuation etc? I am about to negotiate a couple of thousand off the price I have offered for a house which will need a rewire.

If I am successful, what happens to the mortgage? I would need to keep the two thousand back from my deposit to do the remedial work needed, but that means my LTV drops below the 75% required by my lender. Any way around this?

sebtomato

You will need a new, revised offer from your lender if the LTV ratio is changing, and this is affecting the mortgage rate. I was in the same situation, and to keep the same LTV, the lender had to revise their offer with a slighly lower loan.

property.advert

Your mortgage offer is on the condition at the time of purchase, not after improvements, so you would "lose" your mortgage percentage from the mortgage offer but you would owe them less. Hardly helps your cash position I know but there is perhaps a way around it.

If the seller agreed to have say £2000 retained by his solicitor to pay for the work which was agreed all round then it might be possible but whether that could legally be incorporated into the contracts without creating mortgage fraud (though it seems a common sense solution) I do not know. It works in a practical sense but the devil will be in the detail.

milliebear00001

sebtomato wrote: »

You will need a new, revised offer from your lender if the LTV ratio is changing, and this is affecting the mortgage rate. I was in the same situation, and to keep the same LTV, the lender had to revise their offer with a slighly lower loan.

Trouble is, I can't drop below 75% as my mortgage lender won't offer me a mortgage on that basis. It means I will only save £500 on my deposit, but will obviously pay less for the house overall which makes it worth doing. Oh well, might have to delay the work for a while so I can save up!

Evilm

You can arrange upto £2k building allowance without changing your mortgage offer. Thats what we did and it doesn't affect the sale price but effectively the sellers are giving you £2k back in order for you to complete work that is felt should have been done whilst they own the house.

milliebear00001

Evilm wrote: »

You can arrange upto £2k building allowance without changing your mortgage offer. Thats what we did and it doesn't affect the sale price but effectively the sellers are giving you £2k back in order for you to complete work that is felt should have been done whilst they own the house.

I am not sure how this works?

Mobility151990

Retention is what it is called, ask your lender about it.

Evilm

milliebear00001 wrote: »

I am not sure how this works?

Our solicitor sent the sellers solicitors 2k less than the purchase price and therefore "kept" the extra funds to put towards the work.

lee636

Evilm wrote: »

Our solicitor sent the sellers solicitors 2k less than the purchase price and therefore "kept" the extra funds to put towards the work.

Does that effectively mean that the £2k was still taken out through the mortgage and so actually cost you significantly more as it would be £2k x mortgage interest rate?

Only ask as we potentially have to do the same thing and I hate the idea that a small amount held back applied through via the mortgage will end up costing a lot more due to the added interest but dont really have a way around it.

Evilm

lee636 wrote: »

Does that effectively mean that the £2k was still taken out through the mortgage and so actually cost you significantly more as it would be £2k x mortgage interest rate?

Only ask as we potentially have to do the same thing and I hate the idea that a small amount held back applied through via the mortgage will end up costing a lot more due to the added interest but dont really have a way around it.

No, we had a large deposit (over 50%) and had already added a few thou to the mortgage we would "need" to complete on the house for some work we immediately wanted to do.

If you are getting a 100% mortgage then yes the £2k is going to cost you mortgage interest as well. If not then it just reduces the amount you have to put into the transaction by 2k.

lee636

Ahhh, makes sense when someone puts it down instead of going round my head!!