Mortgage refused on property which is already mortgaged with the same bank

balich

Hi everyone!

I am a first time buyer and have been given 80 per cent LTV (Loan-to-Value) mortgage, subject to valuation, by Abbey to buy a property in North London that is also currently mortgaged by them. The owner has purchased this ex-council flat 3 years ago by getting the mortgage through Abbey.

After valuation the bank have found that the block in which the flat is located is 8 storey high and has a lot of council tenants. On that basis they refused mortgage because it is a risky investment and in case of repossession the bank may not be able to sell the flat. That is what i have been told by the bank.

The valuation company has left the following comment under section of Marketability:
"The property in a local Authority high rise block. Most lenders consider such property as unsuitable security and resale is generally restricted to cash buyers. The property is the only flat listed on the Registry"

The last sentence i believe means the property is the only flat in the block that was sold with a mortgage. That's what the bank said when i called them.

I decided to try with NatWest and had the same result. After that i have tried to as independent mortgage advisor to speak to different lenders and see if any would provide mortgage for this property. The mortgage advisor has tried every contact he had but said was not able to.

I am very amazed that Abbey did not give me mortgage in the first place even though they have given the mortgage on this property to the current owners 3 years ago. They are basically not loosing anything. Secondly with 80 per cent LTV the bank has got a good chance to sell the property in case of repossession.

I am hoping that someone could answer me the following question:

Since Abbey have given me a mortgage subject to valuation on the property they have previously mortgaged, are they doing anything illegal by refusing me the mortgage on the basis of valuation?

I find it very odd and do not see what the bank is loosing?

I really want the property even though there is a chance that i could try and sell it in the future and likely to have the same problem selling the place. However, i am hoping to rent it out, if i decide to move, as it would be more profitable for me. Also, i have struggled to find the property i like in London as my budget is not big so getting this place would mean a lot to me.

You help advice will be much appreciated!

Regards

Balich

BoGoF

I'm surprised the original purchaser managed to get a mortgage on that property.....very few lenders would lend on such a property.

Unless he had a very large deposit and it was a small mortgage but ultimately just because they lent previously does not mean they will again and have decided not to. It's the end of the road for that property and you I think

MarkyMarkD

No, Abbey (and by the way, there is no such bank, so I am surprised you are calling them that - it's SANTANDER and has been for ages now) are not doing anything illegal.

All banks have lending policies and that determines what type of property they will lend on. These policies change from time to time - and generally, they have got tougher now than they were a few years ago.

Whilst you suggest they are "not losing anything" by allowing you to purchase the property at 80% LTV, that is only true if the existing borrower is already on 80% LTV or more. Even if that is the case, it is academic - lenders don't consider the existing mortgage on a property when considering whether you are eligible to borrow to buy it.

G_M

The existing borrower/owner may have borrowed a much smaller % of the property value.
The bank may not have realised 3 years ago that the property was ex-;ocal authority if the valuer at the time did not highlight it.
The bank's lending policy may have changed.
Or something else.

The property is the only flat listed on the Registry"

The last sentence i believe means the property is the only flat in the block that was sold with a mortgage.

No. Nothing to do with mortgages. The reason the land registry has no record of the other flats is probobly that they have not been sold/bought since the LR was set up in the 1970s-80s. They are probobly still local authority owned.

taxsaver

Although you don't currently see it like this, they are doing you a favour and you've had a very lucky escape!

JoannaK_3

Hi everyone

I'm the owner of that flat that this forum is referig to. We have borrowed money of Abbey (at the time of us borrowing money it was Abbey) 3.5 year ago with the 10% of the deposit. They did know at the time of lending us money as this was stated on a valuation report. Our mortgage also states that we can move with it to another property when required but how if they don't want to borrow money to anyone else now. 1 year ago we wanted to remortgage out flat and approached Natwest who offered as the mortgage on the same property and again now refusing it to our buyers. This is ridiculous, there is absolutely nothing wrong with my property, it's been fully refurbished, it has got new gas central heating and it's own entrance and also a garden. It's in a good location, close to the tube and many buses.
The amount of mortgage that is currently outstanding on the property would be more or less the same what the buyer would be borrowing from Santander now. WHich would mean that they will only need to change names on the mortgage and the rest will remain the same. As per teh buyers notes, Santander would still get their money back in case of repossession. Them refusing a mortgage to the new buyer just doesn't make sense. If sombody knows anything about any law that would be enforsing them to borrow money on the property which they have mortgage already, especially that the amound of the outstanding mortgage would remind the same.

Annisele

Sorry - there's no law that can force a lender to lend on a property / to a borrower if they don't want to.

When Abbey lent to you, they entered into a contract for 25 years (or whatever the term of your mortgage). So, even though their lending criteria have now changed, they can't demand that you suddenly repay your entire loan (unless you breach the terms of the mortgage). However, Santander *can* decline to enter into a new contract with a new buyer - and they're absolutely within their rights to do so.

I'm afraid that if your buyer asked me for advice, I'd tell them to walk away and find somewhere else. As the seller, you may be stuck selling to cash buyers only - but if you're using a broker for your new purchase, it might be worth having a word with them as to whether they can suggest a mortgage lender for your potential buyers.

_Andy_

balich wrote: »

I am hoping that someone could answer me the following question:

Since Abbey have given me a mortgage subject to valuation on the property they have previously mortgaged, are they doing anything illegal by refusing me the mortgage on the basis of valuation?

Not what you want to hear but no, not at all.
You've kind of answered it yourself in the words above, 'subject to valuation'.

BitterAndTwisted

In my opinion the OP has had a lucky escape.

chambta

What if their lending policy has changed?

What if they have made a mistake in the first place and don't want to follow it up with another?

poppysarah

What lifespan has the building got?