Mortgage questions! Santander content.

MPLPC1982

Evening all.

I'll start at the beginning (it's a long story). Me and my other half have been renting for what seems like aeons, when our first child arrived last February we started thinking of buying somewhere. The other halves grandmother was then taken into long term care (you can probably see where this is going). Earlier this year it got to the stage where her savings had been eroded to the point that her house had to be sold to keep up with the care costs. This is where we step in.

The house is valued at £75k by three separate estate agents so we agree on a price of £66k. Mortgage is obtained, solicitors are put into actions is going well until we have a good look at what needs doing in the house. A little bit of digging reveals a damp problem and that it needs a complete rewire. We are in quite a fortunate position that it's a sale within the family so some hasty negotiations later we agree on a purchase price of £60k with the intention of us still mortgaging against the £66k that the house has been valued at on the survey. This leaves us with a £6k wedge of money to get the urgent works done and make it liveable.

We (both parties) informed our solicitors. Ours seemed to think that it would be fine but that they would have to run it past the mortgage provider (Santander). I then got a phone call yesterday from our advisor stating that they wouldn't be able to lend above the purchase price as me and the other half aren't married but if we were it would be fine.

Is this just a Santander thing or is it and industry wide practice? I'd rather know first before I go out looking for other mortgages only to keep getting knocked back because we of it.

Sorry for the huge long post!

Thrugelmir

The mortgage offer will be based on the purchase price for the property.

MPLPC1982

So if that is the case then why have I been told by a Santander mortgage advisor that were we married they would quite happily lend against the value of the property not the purchase price?

kingstreet

At what amount has the lender's surveyor valued the property?

At what price are you purchasing the property?

What amount are you trying to borrow?

What amount of deposit do you have and its source?

ethank

I'm not a mortgage advisor, but I have heard it is pretty wide practice that lenders will lend the lowest of the purchase price or the valuation.

I don't know why the Santander person said that. Is it likely that they could be wrong?

kingstreet

I suspect a misunderstanding.

I reckon the OP was buying the property at a discounted price, a "concessionary purchase" with the true value of the property being higher than the agreed price and the difference being the OP's "deposit", with no actual cash deposit being paid.

Once the essential repairs were identified, the OP has then tried to reduce the price, but borrow more than that, to get the work done, which the lender will not accept.

For example;-

Property value £100k

Concessionary purchase price and mortgage amount £80,000.

Following valuation, property valued at £100k with £10k essential repairs needed.

Concessionary purchase price reduced to £70k, but mortgage amount still £80k to buy property and get repairs done.

Lender will only lend £70k, as that is concessionary purchase price.

Concessionary price should have been left at £80k and vendor asked to pay for remedial works out of sale price.

MPLPC1982

kingstreet wrote: »

I suspect a misunderstanding.

I reckon the OP was buying the property at a discounted price, a "concessionary purchase" with the true value of the property being higher than the agreed price and the difference being the OP's "deposit", with no actual cash deposit being paid.

Once the essential repairs were identified, the OP has then tried to reduce the price, but borrow more than that, to get the work done, which the lender will not accept.

For example;-

Property value £100k

Concessionary purchase price and mortgage amount £80,000.

Following valuation, property valued at £100k with £10k essential repairs needed.

Concessionary purchase price reduced to £70k, but mortgage amount still £80k to buy property and get repairs done.

Lender will only lend £70k, as that is concessionary purchase price.

Concessionary price should have been left at £80k and vendor asked to pay for remedial works out of sale price.

Exactly that and your last point is what is likely going to happen.