Remortgage Valuation

Cars_2

Hi all

We've just bought a house for what we believe to be considerably under market value. The house was a cash purchase. We are hoping to release all, if not the majority of equity via a mortgage based on the true market value of the property. We are confident the lender's valuer's enquiries with local agents will support our view of value, however, will the actual price we paid effect the lender's perception of true market value?

Cheers

Annisele

Cars wrote: »

Will the actual price we paid effect the lender's perception of true market value?

Short answer: yes.

The lender's concern will be the price it can get if it has to repossess. If nobody else was prepared to pay more than you, then the lender will have serious doubts about the actual value of the property being more than you paid.

Exceptions might be things like: you bought it from a close relative (i.e. not on the open market, and they gave you a discount); you've done work to it that genuinely increased its value; you've got some sort of planning permission that wasn't there before...or just that the market has moved up since you bought. If you want to rely on something like the latter, you'll have to wait a while.

You won't be able to release all of the equity. Lenders will also care about what you want to spend the money on (eg debt consolidation not good; buying a new property probably OK).

dimbo61

You will have to wait at least 6 months before you can get a mortgage!
The price you paid for the property will come up on the Land Registry and that is what any surveyor will look at!
So unless you put in a new kitchen/Bathroom/s and complete refurbishment or large extension/loft conversion you will not ADD a lot of value.

Cars_2

Thanks guys

We bought the property from a friend off the open market.

We plan to extend the house from a 2 bed 1,400 sq ft property to a 5 3,000 sq ft house. Do you think getting the planning permission together with the above will be sufficient to borrow at the full market value?

Yes, the equity release will be used for a 2nd property purchase.

Cheers :beer:

dimbo61

Planning permission may add a little value but what is the "Full value " of something that is not built.
How much will the build cost ? £20,000 or £200,000 due to many unforeseen problems ?
The cost of an extension can sometimes add less "Value" or even Devalue a property.

Thrugelmir

Cars wrote: »

Yes, the equity release will be used for a 2nd property purchase.

The purpose of the funds may well impact a lenders decision if an application to remortgage is made. May well impact the BTL application as well if the source of the deposit is borrowed funds.