Mortgage for less than value but more than purchase price

LucidlyKataklys

Hi all,

Apologies if this has been covered before (I did a search before posting but couldn't find anything really relating to my query).

Background:
A friend has recently offered myself and my partner the chance to buy their home for quite under the estimated valuation.

The valuation is in the region of £100,000 to £110,000, but they have offered us to purchase the property for around £60,000.
The reason for this is they have another property ready to move into, and no mortgage on this one, and are looking for a quick sale whilst helping us out.

Whilst the house is in good condition, we would like to make some small improvements (bathroom, kitchen etc) and would like to borrow the extra money to make these changes.

My questions are:

1) would the bank lend us £70,000, whilst we are only purchasing for £60,000 (Thinking possibly would need a broker or similar)?

2) Would we have to pay a deposit, as in essence we are taking out a mortgage with a low LTV (Between 64% and 70%), or would we need to pay a deposit on the £70,000?

Sorry for the wall of text above, would just like some info before approaching brokers/banks etc.

Leon_W

It can't be done in the way you suggest. Mortgages are always based on the purchase price or valuation WHICHEVER IS LOWER. You'll need a deposit.


You'll also have to fund the refurb yourself. It then may be possible to remortgage the house based on a higher valuation but there are no guarantees.

Brighty

As above, your LTV will be based on the purchase price, so £70k is a no, so will £60k, your best hope for a mortgage is probably 90% so £54k. Get a very short deal, then remortgage to a new lender who will value the property then and only then will you have a 60-70% ltv

Brighty

duchy

I'm not so sure
I did manage to do this some time back.
Mortgage was with the Halifax but we needed a broker.
Back story was it was under right to buy so below market value and I had to declare what improvements I was making and costs but the broker didn't seem to think it was unusual .

It may be things have changed but a broker would be the best way to find out.

Thrugelmir

LucidlyKataklys wrote: »

The valuation is in the region of £100,000 to £110,000, but they have offered us to purchase the property for around £60,000.

What's the catch? People just don't give away £50k.

Leon_W

Yours was a Right to Buy duchy. These are treated differently.

LucidlyKataklys

Thanks for the replies everyone.

I had a feeling about that, but wasn't sure so thought I'd ask (you don't ask, you don't know).

Wasn't too sure if it was doable with a broker in between, but looking at it maybe not.

If anyone does know anything else on this matter, please let me know.

As for Thrugelmir's reply, no catch for this one. The friend has another property that they are making into their dream home, our current rent agreement is up soon and they knew what we could afford.

We get a step on the property ladder, they get an easy(ier), quick(er) sale than selling to anyone else.

For the millions of people (myself included) that would never throw away £50k even if they have enough, some will (Not complaining obviously).

Leon_W

Some lenders will allow a concessionary purchase. That means you could effectively buy the property at a discount if you've been a tenant of the landlord for at least 12 months. If they want a quick sale it doesn't help you but I thought I'd throw it in anyway.

LucidlyKataklys

Thanks for that Leon W, any information is good to be honest.

Will have to suggest that, you never know.

Foxy-Stoat_3

You should buy the house for £90,000 and take out a mortgage accordingly, then your vendors can just give you £30,000 in cash back for you to decorate and upgrade the house for you.

Done and done !

Funny_old_game

A vendor deposit is always declined. If anyone lies to the lender about this then the solicitor will tell them.