Overdraft effecting my mortgage application - growing worried

JimmyTheWig

TheAllanCadenhead wrote: »

You would be stupid to buy a car for £2k, knowing full well experts have said it's only worth £1k.

I actually think this is a perfect analogy. Because when you buy a car from a garage that is what happens.
Car on forecourt priced at £2000.
Get bank loan for £2000.
Go back after a few weeks because you've changed your mind.
Dealer offers you £1000 for it.
Unable to repay bank loan in full with the proceeds.

You could argue that the car was only worth £1000 in the first place, because that's all you would be able to (easily) sell it for yourself.


If they won't budge from a selling price of £120k, have you got anyone you could borrow £2,250 from? (And would you be able to afford to pay them back?)

kingstreet

It's a simple market downvaluation. If it's been on a long time, it's probably because it's overpriced. The HA may have had it valued and not kept up with the falls in that particular area.

It's likely that the HA has tried to sell it first, before handing it over to the vendor to try to sell it on the open market. It may have been available for a year or two already.

As I said, all you can do is wait until the vendor puts the valuation to the HA and see what it says. On Shared Ownership, you don't own all the property and a lot of issues are determined by the HA, but you get all the headaches as if you did, such as the maintenance costs.

Your lender will simply make you an offer based on the surveyor's valuation figure. So, £110k at 100% equates to a 25% share of £27,500 and a deposit of £2,750 and mortgage of £24,750. They may wait to hear from you before making the offer, as they'll need to amend the purchase price to the valuation figure. In the interim, you might as well do the letter they are requesting so you at least know if they are prepared to lend to you.

On the subject of the fees you've paid, have a look at Section 8 of your key facts illustration for when/if lender fees are refunded and at your Initial Disclosure Document which will explain any fees you've paid to the broker.

TheAllanCadenhead

JimmyTheWig wrote: »

If they won't budge from a selling price of £120k, have you got anyone you could borrow £2,250 from? (And would you be able to afford to pay them back?)

I really wouldn't be comfortable buying house at the higher price knowing full well it is worth less than what we are buying it for, as when I come to sell it we're going to be out of poket. This might even put us in the position of negative equity if the price calls lower when we do come to sell it? I think? Is that right?
Or have I got the wrong end of the stick? At the end of the day, I'm not going to buy something just for the sake of it. I'm desperate for this all to go through, but not under these circumstances. You have to have the IQ of an olive to go ahead with this... right??

To be fair, I think it's a bit naughty that no one has said anything and it's up to the ordinary joe bloggs who doesn't know the first thing about mortgages and valuations to point this out.

kingstreet wrote: »

It's likely that the HA has tried to sell it first, before handing it over to the vendor to try to sell it on the open market. It may have been available for a year or two already.

As I said, all you can do is wait until the vendor puts the valuation to the HA and see what it says. On Shared Ownership, you don't own all the property and a lot of issues are determined by the HA, but you get all the headaches as if you did, such as the maintenance costs.

I'm assuming Ha means Housing Association? Or Housing Agency?
I am forwarding the letters which are signed and dated to Leeds today. So the overdraft thing doesn't worry me that much. But if the sellers don't budge then I will be wishing the sellers good luck finding someone who is going to buy something that isn't worth what you're selling it for and i'll be looking for another property.

kingstreet

Housing Association.

This is the outfit which owns the rest of the property.

JimmyTheWig

TheAllanCadenhead wrote: »

I really wouldn't be comfortable buying house at the higher price knowing full well it is worth less than what we are buying it for, as when I come to sell it we're going to be out of poket. This might even put us in the position of negative equity if the price calls lower when we do come to sell it? I think? Is that right?
Or have I got the wrong end of the stick? At the end of the day, I'm not going to buy something just for the sake of it. I'm desperate for this all to go through, but not under these circumstances. You have to have the IQ of an olive to go ahead with this... right??

I think that's a call that you need to make.
This isn't purely an investment decision. Doing nothing isn't an option. You have to live somewhere.

It might be the case that you can get 25% of something better for the same £120k (I.e. something that is actually valued at £120k). In which case yes, you may as well do that.
It might be the case that if by being £2.5k "out of pocket" from day one if you buy you would be better off renting. In which case yes, you may as well do that.
Or it might be the case that whatever shared ownership place you look at has this same problem, that you can't afford a mortgage on a place outright and that regardless of this price discrepancy it would still be cheaper to do it this way than continue renting. Part of that decision will depend on how long you plan to stay in this house. If you move after 2 years then paying above the valuation will have a serious effect. If you stay for 10-15 years then it will be less important.

At the end of the day it is still the same property that you were happy to spend that money on. As long as the survey hasn't told you anything you didn't know (e.g. there's £10k of work that needs doing that wasn't apparent) then nothing has changed that.

I'm not saying that you should do it. Just that for me it wouldn't _necessarily_ be a deal breaker if I was able to get my hands on the additional deposit.
But even if you do decide to go for it, it's still worth pushing for the price reduction. No need to tell them you'd proceed at the higher price regardless!

TheAllanCadenhead

JimmyTheWig wrote: »

I'm not saying that you should do it. Just that for me it wouldn't _necessarily_ be a deal breaker if I was able to get my hands on the additional deposit.
But even if you do decide to go for it, it's still worth pushing for the price reduction. No need to tell them you'd proceed at the higher price regardless!

Thanks Jimmy. On that note, you know you mentioned the property is valued at £110k. We applied for a mortgage for £120k. I'm assuming Leeds BS already know this as they were the ones who forwarded on this valuation form to us (it came in a Leeds BS envelope).

I would assume that they are still processing the mortgage application based on £120,000 as that is what the property is being sold for?

You make sense. At the moment me and my fianc! still live at home, as we are first time buyers. So we still have the option to pull out and get somewhere different.

JimmyTheWig

Sooner or later they will let you know that the most they will lend is £24,750.
On the off-chance that they don't I would say that you need to contact them to confirm things. Don't assume that they have decided not to act on the valuation.
If they only notice this the day before you are due to move (e.g. after you have exchanged contracts and so committed yourself to moving) they won't see it as their fault and you'll be the ones who are stuck.

Teeny29

Don't panic! I was in exactly the same position as you-in my overdraft and applying for a shared ownership mortgage with leeds. It all got approved today so it'll all be ok. Relax!

TheAllanCadenhead

JimmyTheWig wrote: »

Sooner or later they will let you know that the most they will lend is £24,750.
On the off-chance that they don't I would say that you need to contact them to confirm things. Don't assume that they have decided not to act on the valuation.
If they only notice this the day before you are due to move (e.g. after you have exchanged contracts and so committed yourself to moving) they won't see it as their fault and you'll be the ones who are stuck.

Ah, I get it. Well, just for clarification, it IS Leeds Buildings Society who did the evaluation. I have the letter in front of me. If it helps this is what the form says under the 'Applicant name property address' heading:

"What is the purchase price/estimate value (as stated in instruction, or to the valuer)? £120,000"

Then it goes through accommodation, construction, tenure etc. Then on the next page it says under the 'Valuation for mortgage purpose' heading:

"Present condition £110,000
No repairs, no retention required"

So there you have the exact cause of my worry. I will be speaking to Leeds BS tomorrow to find out what they make of it. I'm still sticking to the whole 'If we can't buy it for £110k then we're not buying it, find some other sucker'. I'm actually really annoyed at how much stress all of this has bought on. But maybe I should calm down and wait to hear it from the horses mouth before getting my knickers in a twist.

Jimmy, you have been so much help with all of this! Thank you so much!

Teeny29 wrote: »

Don't panic! I was in exactly the same position as you-in my overdraft and applying for a shared ownership mortgage with Leeds. It all got approved today so it'll all be ok. Relax!

Thanks for the comfort talk Teeny. How long have you had your mortgage with them? Are their Customer Service any good? Had any problems?

gaz141

I've had my Leeds BS shared ownership mortgage for 5 months now, so far so good, was easy sailing, no probs. Solicitors on the other hand, now don't get me started