Quick mortgage question! deposit?

blackrandomapple

Hello,
Just a quick question, would be nice to get a answer from some one who know a little more than me,

I wont go into any details because there is no need (not being rude). here is my conundrum.

I need a £20k Deposit.

I dont have the money, So...

I find a house.

Its for example £150k,

Can i get a mortgage for £170k And use £20k for deposite and £150 for the house?

Im i thinking like a donut?

Or is there a similar way of doing things?

Any help on this would be awsome!

blueberrypie

The lender will want to see proof of your deposit and will ask what the source of your deposit is.

If the house was valued at £150k, a lender will offer you at most 90% of that value, so you would be able to borrow at most £135k - not £170k. You would have to find the 10% deposit, plus any fees for mortgage, solicitors, moving costs etc.

beecher2

No easy way round it I'm afraid - you have to save a deposit.

blackrandomapple

blueberrypie wrote: »

The lender will want to see proof of your deposit and will ask what the source of your deposit is.

If the house was valued at £150k, a lender will offer you at most 90% of that value, so you would be able to borrow at most £135k - not £170k. You would have to find the 10% deposit, plus any fees for mortgage, solicitors, moving costs etc.

Thanks for fast reply,

So under no circumstances will they pay more than the value of the property.

Our country is silly. have have been looking at mortgages for about 6 years. I earn a good wage but still i dont stand much of a chance!

beecher2

blackrandomapple wrote: »

Thanks for fast reply,

So under no circumstances will they pay more than the value of the property.

Our country is silly. have have been looking at mortgages for about 6 years. I earn a good wage but still i dont stand much of a chance!

It would be very silly for a lender to lend more than the house is worth - that's partly what got us into this mess in the first place. If you earn a good wage and have been thinking about it for 6 years, why do you not have the beginning of a deposit? If you post a statement of affairs onto the Debt Free Wannabee forums, you'll get help in budgeting.

blueberrypie

blackrandomapple wrote: »

Thanks for fast reply,

So under no circumstances will they pay more than the value of the property.

Our country is silly. have have been looking at mortgages for about 6 years. I earn a good wage but still i dont stand much of a chance!

Think of this from a lender's point of view. They are about to give you a lot of money. They want to be as certain as possible of getting that money back. Now let's say that after a few months you stop paying your mortgage - where does that leave your lender? Well, they can eventually repossess your house - but it will cost them (legal fees, cost of selling it to someone else, etc). So they aren't likely to get back the full value of the house.

So why would they lend you 100%?

And why would they lend you *more* than 100%?

Well, in the few years prior to the credit crunch, some lenders reckoned it would be okay to lend 100%, or even more, because they figured that house prices were always going up, and even if someone defaulted, they'd get more for the house than it was originally purchased for. As a consequence, lots of people took out 100% mortgages, even 125% mortgages.

Then came the credit-crunch - the causes of which are extremely complicated, but certainly have something to do with people with money lending money to people who couldn't afford to pay it back.

And house prices tumbled...

The lenders who provided 100%+ mortgages are often in trouble now, because the collateral they have for their loans is not worth as much as the loans.

And the borrowers who took out those mortgages are often also in trouble, because they're living in houses which aren't worth as much as they owe, and therefore they can't remortgage. They can't sell, because they'd have to find the money to pay the difference between what they sell for and the amount they owe. And in some cases, they can no longer afford the mortgage payments either.

Of course if the lender only provided 90% of the cost of the property, they can repossess and (usually) get more than their money back. And if the borrower put down a decent-sized deposit, they are much less likely to be in negative equity, so they have options.

Do you still think it's silly that lenders don't want to lend more than the value of a property?