Who determines the Value in ‘Loan-To-Value’?

sonnydeletejc

Hi, I wonder if anyone can set me on the straight and narrow.

My 5 year fixed rate mortgage term with Santander will be drawing to an end at the start of next year so I’m doing a bit of research before I decide what I want to do next.

I’ve been shopping around looking at various Mortgage deals, but each time I see the loan to value, I’m a little unsure what ‘value’ actually means.

In the Loan To Value model, is the value based on the price I paid for the property, or the current value?

If it is the latter, how does the lender determine the current value of the property? Is it by ‘automated valuation calculation’, which is a buzzword I’ve seen during my investigation?

I will have roughly 120K left on the mortgage, after buying the property for 153K. But I’m hoping that property may have gone up in value, so it makes a difference on what deals may be available to me.

Can anyone offer any advice?

Many thanks.

J

gaznolan

Its the value put on your property by the new lender ie he comes out and values your house at £150,000 you want to borrow £120,000 so your LTV is 80% , I would very much doubt that the valuer will say your property has increased in value though unless you have done a very big extension to the property. If you are borrowing over 75% then usually the minimum would be a drive by valuation below that then it is usually an electronic val if you are looking at 80% then you would probably get a surveyor knocking on the door

RenovationMan

As the previous poster has already said, the LTV is based on a valuation carried out by the mortgage provider. The LTV is then fixed until the end of your mortgage product and you either go onto SVR (in which case a LTV is unimportant) or you get another mortgage deal (in which case you will have another valuation).

LTV and valuations are concept that many people find difficult to understand. I have lost count of the number of times 'crashers' (the nutters on the House Price board who want a housing crash) have taken issue that the value of my house on my signature has not changed, even though house prices have moved in the 2 years I have been doing my 50% LTV challenge.

No matter how many times I tell them that the LTV is based on the valuation when I bought my house and that valuation is fixed until I remortgage, they simply don't get it. Oh well, as long as I have a 50% LTV when I remortgage then that's all that really matters.

The_J

Why would your house have dropped in value since May 2010?

A friend of mine just made £100k profit on a property he bought 11 months ago with no work done to it. Granted, it's in a nice area and is a desirable property but that's still a big jump.

"Crashers" will be people who have very little intelligence. They like to believe conspiracy theories. As such they have very little drive in life, they want to be handed everything on a plate and not have to work for it. Everything will be unfair unless it's something that benefits them. House prices are like ANY commodity, it's price is determined by supply and demand, there is no general line that a house price follows. You can't split it up by region, you can't even split it up by county, sometimes you can't even split it up by street.

I cannot fathom people who don't understand that.

RenovationMan

Couldn't have put it better myself TJ.

I have little interest in house prices so I generally just laugh it off. Others on the forum of a more intelligent and reasonable bent have pointed out that after spending £10k's renovating the property that it's unlikely to have gone down in value. You can't tell them this either.

Generally speaking the crashers are unhappy souls who drink from a totally empty glass.

sonnydeletejc

Thanks everyone from your input.

So, if I understand things, as long as I stay with Santander, the LTV is not an issue, because they have already given me the loan. The only think which may change is the rate and mortgage type if I decide to chose a different product.

But, if I decide that I want to leave Santander and go to another mortgage provider, I will have to go through the process of having my property valued by the (potential) new provider. I assume that in this case, if they decide the property isn’t valuable enough, and I am below the threshold of what they will be willing to loan me I still have to pay for their valuation?

gaznolan

With a re mortgage you should get free valuation and legal work so don't worry too much about the fees, any other product fees can be added to your loan

helger

Will the LTV be changed (i.e. will there be another valuation) when switching products with the same lender?

vectistim

helger wrote: »

Will the LTV be changed (i.e. will there be another valuation) when switching products with the same lender?

It depends, lets say your lender has stepped rates, eg:
4.5% up to 75% LTV
4.25% up to 60%
4% up to 50%

Lets say you buy and have a 5 year fix at 4.5% with the 75% LTV
At the end of that period you might think your house has gone up sufficiently in value for you to access the 60% LTV, the lender may then decide to get the house re-valued to see if it satisfies the 60% threshold and so your remortgage might end up at, say 58% LTV.

But really, the LTV figures are only really of interest at the point of getting a mortgage, (unless you're an investment company looking to buy mortgage debt). Beyond that you can update your LTV figures however you want with mortgage balances changing and house prices changing, but such a number will just be a figure on your own spreadsheet and will be of no consequence to anyone else.

Dave_Ham

Worth mentioning that if you are currently on interest only or part and part, Santander will not be looking to offer you much and even remortgaging (subject to circumstances) on similar terms may be tricky..

All the best.

sonnydeletejc

So, would you say that if I’m looking around at re-mortgage deals with other providers I should assume that my property value is still 153K, before I decide whether it’s worth applying?

I want to avoid the situation where I keep having to pay every time I apply for a re-mortgage deal which looks appealing – unless it’s normal to have no-fee valuations when applying to re-mortgage?