mortgage valuation what happens if your house is worth more?

zippe

Hi all,

The house we would like to buy is being sold a lot cheaper than others in the close.

Next door is on the market for £325000 with an expected value of maybe £285000 (clean and tidy but original as in 1973)others have sold between £289000 & £319000

All the houses are the same condition outside as they are covered by a management group, and similar inside.

My point is if the banks valuation is higher than the asking price do they factor this in or just say they that the applied for mortgage is approved.

So if a purchase price of £250000 requires a 10% deposit of £25000
would the bank take into account the properties real value?

thanks for any advice
Paul

GMS

Lenders will use the LOWER of the purchase price or valuation to base figures on.

If it values higher than the purchase price you cannot use the difference as a deposit (except with family sales and Right to Buy)

sjbu

we are in a similar situation, property purchase price 175k, approximate actual value is over 200k

I have been led to believe that the mortgage company will only take the purchase price into consideration, but if we get a re-value in the future then that is when the extra equity will be noted, so for example if in 6 months we get a re-value, it may be valued at 200k, thus meaning we could potentially have a different mortgage product because of lower LTV

brit1234

Sorry but isn't a value of a property what it sells for. If you pay X for a house, then it is registered as X on the land registry. Surveyors then use use the X benchmark to value other local properties.

Have I got this wrong?

zippe

So, If We could use a crystal ball and know that the house would be valued at a higher value in the near future would it be advisable to go with a short term mortgage first and then use the equity for a re-mortgage after the first year, as a bigger deposit would provide a greater saving because of the lower LTV?

i.e purchase price £250000 10% deposit = 5.99% 9£1334.07 per month) then remortgage at £275000 value with a 25% deposit = 3.49% rate (£925 p/m) (comparison on today's figures)

GMS

In theory you could do it.

However make sure there are no Early Repayment fees with the initial mortgage, which will usually mean a higher rate so work out the figures between this and a 'standard' mortgage.

After a year the base rates may well have risen and so will the fixed rates available. You could end up with a lower LTV mortgage being the same rate as the first one.

No guarantee of the prices rising in the short term so it is a gamble.