The real meaning of LTV

sdisbury

Until today I thought that LTV meant Loan to Value.
Eg: if a property is worth 70k and it is being sold for 57k then the ltv is 84%.
In HBOS they advised me that they will only only lend up to 90% of the value or purchase price, whichever is lower.

Is this standard across the market?
It feels like a bit of a cheat.
Thanks.

GMS

sdisbury wrote: »

Until today I thought that LTV meant Loan to Value.
Eg: if a property is worth 70k and it is being sold for 57k then the ltv is 84%.
In HBOS they advised me that they will only only lend up to 90% of the value or purchase price, whichever is lower.

Is this standard across the market?
It feels like a bit of a cheat.
Thanks.

LTV is based against the LOWER of the Purchase Price or Valuation, unless sitting tenant, family undervalue sale, Right to Buy and similar transactions.

If the LTV was based purely onvalue there would be manipulation of the figures to avoid deposits amongst other things.

sdisbury

So not really Loan to Value then?
More like Loan to Personal Commitment?
Very disappointed.
Ho hum.

GMS

sdisbury wrote: »

So not really Loan to Value then?
More like Loan to Personal Commitment?
Very disappointed.
Ho hum.

A lender's main concern is that the property is worth what it is being purchased for, therefore their loan is covered by adequate security.

A valuation will ascertain if the security is suitable. If the purchase price is seen as a correct figure then that is the valuation. If the purchase price is deemed to be too high then they will adjust the figures for the loan.

Could argue that all the balls are in the lender's court, but they lend the money and can do what they see fit unfortunately.

sdisbury

Indeed.
I would hope that the home reports (I'm in Scotland) and independent valuations would eliminate fraudulent reporting of value and therefore, secure the bank's investment.
I appreciate that this could be abused unless strict procedures are followed.
Still, thank you for your replies.

blueberrypie

sdisbury wrote: »

Until today I thought that LTV meant Loan to Value.
Eg: if a property is worth 70k and it is being sold for 57k then the ltv is 84%.
In HBOS they advised me that they will only only lend up to 90% of the value or purchase price, whichever is lower.

Well, yes. I mean, the value of a house *is* the purchase-price. That's the only way you can really define what a house is worth. It doesn't matter what price it's up for sale for, or what the house-next-door sold for, or what it was valued at last year - it's worth as much as you can sell it for today.

If you had a house that was worth £70k, why on earth would you sell it for £57k? And why would your mortgage provider believe that if they had to repossess and sell it, they could sell it for £70k?

vectistim

The lender's 'value' in LTV is the price that they (via a valuation) estimate they could achieve in an arms length transaction for the sale of the property.
It may be the case that for a particular purchaser the property is worth more, eg: the neighbour might want to buy it for family use and might therefore be prepared to pay more than anyone rationally would in the open market. Say that neighbour might be prepared to pay £10-15,000 more to secure it - their lender will not include that extra when working out a LTV since they would not be able to access that extra value as that was particular to one purchaser's circumstances.

cardinalbiggles

The market decides valuation not surveyors, they only sugges what they think it is worth going on all the evidence they have.

I just bought in Scotland for 10% less than valuation (should have offered less but thats hindsight!) this to me means that the house is worth this not what the surveyors thought it was worth otherwise it would have probably sold for more.

The LTV is always against what you pay for it as thats in effect the market value.

Why is it a problem if they will only loan against the lower figure?

citizen11

sdisbury wrote: »

Until today I thought that LTV meant Loan to Value.
Eg: if a property is worth 70k and it is being sold for 57k then the ltv is 84%.
In HBOS they advised me that they will only only lend up to 90% of the value or purchase price, whichever is lower.

Is this standard across the market?
It feels like a bit of a cheat.
Thanks.

If you are really as daft as your posting suggests borrowing large sums of money would be unwise. What figure would dictate the worth other than what is being paid for it?

Loony.

beecher2

The only exception is when selling to close family - this might be what the OP is talking about? Then you can have a gifted deposit which is worth searching for information on if this is the case.

sophievenusdoom

LTV does mean Loan To Value. For arguments sake, if you buy a house for £100,000 and you have a £10,000 deposit, the bank would be lending you £90,000 i.e. 90% LTV.

Citizen - I think you are being a little harsh. It might seem straight forward to us, but other people don't have a Scooby about mortgages or all things financial, so lighten up a bit!