Loan to value ratio - paying less than house valuation

misswilsonuk

Hi there
I'm new to the site so please be nice:)

My partner and I wish to buy a house, we have around £20,000 saved up. We are looking at houses worth around £200,000

We have seen a house we like - it is on the market for £215,000 (offers over, we're in Scotland). It has been valued at £215,000 on the home report (I know the mortgage lender might value this less but I doubt it, it's in a good area and it's a solid house). The house has however been on the market for around 5 months..

The problem is that the rates for fixed term 90% mortgages are so rubbish - If we offered say £195,000 for the house and the offer was accepted would this mean that we would look for more like an 80% mortgage?

In other words - does the LTV ratio mean the % of what you actually pay for the house? or the % of what the house has been valued at by the mortgage lender?

I hope that makes sense, I have a bit of baby brain as just had a baby 5 months ago!

Thanks for any responses

Thrugelmir

Hi,

You need to accept the fact that the higher the LTV, the higher the interest rate. Rate = Risk. So not "rubbish". If you don't wish to pay high rates save more or borrow less.

The lenders LTV = lower of the purchase price or valuation

so for a few examples

£200k @ 90% = £180k
£200k @ 80% = £160k

purplelila-2007

Thrugelmir wrote: »

Hi,

You need to accept the fact that the higher the LTV, the higher the interest rate. Rate = Risk. So not "rubbish". If you don't wish to pay high rates save more or borrow less.

The lenders LTV = lower of the purchase price or valuation

so for a few examples

£200k @ 90% = £180k
£200k @ 80% = £160k

You've lost me???:huh:

Thrugelmir

purplelila-2007 wrote: »

You've lost me???:huh:

Likewise. As you haven't said why?

jimjames

purplelila-2007 wrote: »

You've lost me???:huh:

To quote Thrugelmir : The lenders LTV = lower of the purchase price or valuation

So if the purchase price is £215k and the lender values the property at £200k then the LTV is based on £200k. So 90% would mean you could borrow £180k plus your deposit.

In this instance it would mean you needed to find another £15k to finance the purchase at £215k as it would not be coming from the lender.

dippy

And it also works the other way round, which I believe is what the OP was asking about.

So, if the valuation is £215K and purchase price is £200K (which is very rare in the current climate, i.e. surveyor will usually use the accepted offer and down-value on that), the LTV will be based on £200K.

The LTV is based on the lower amount of either the valuation or purchase price, whichever is lower.

beecher2

If you pay £195,000 and have a deposit of £20,000 then your mortage would be £175,000 which makes your LTV 89%. To get to an LTV of 80% you need a 20% deposit, ie £39,000