Am I right to be annoyed! Mortgage application

kingstreet

"Allowance for work" is a throwback to the days of vendor gifted deposits. You can agree it, but the lender will still knock it off the price of the property leaving you back where I started with the LTV issue.

SusanShaw

So should I ask them to pay for it up front before we exchange. Would that be more straight forward?

amnblog

It appears, since you got your mortgage offer, that the broker made no mistake other than not communicating with you very well.


You are now at risk of making the same mistake.


Any reduction in the purchase price, however insignificant you feel it may be, needs to be run past your broker first as it may affect your mortgage offer.


Your own thoughts about 'allowances for work' or anything else you consider sensible or practical will not alter lender's guidelines.

SusanShaw

Yes I can see that now. I have since emailed my broker for advice.

What would be the best thing to do with regards to getting the vendor to pay for the work?

amnblog

email your broker for advice

Wirenth

Susan, the questions that need answering are:
1. What's the value of the mortgage you plan to put on the property?
2. What price have you offered for the property?
3. What's the value of the property (per the valuation)?
4. What's the LTV limit for the product?

Divide the mortgage by the valuation figure and you will get a Loan to Value Figure.

Some mortgages are only available for a 75%, or 85% LTV, for example. The amount you are borrowing must be equal to, or less than the LTV limit for that mortgage product.

So, if you originally offered 200K for a house and were planning on a mortgage of 170K using a product that has a LTV limit of 85%, then 30K is your deposit. However, say the valuation comes back as house only worth 190K. If you want the same mortgage product, the lender would only lend you £161,500, leaving you to find £38,500 for the deposit, if you stick with the original offer price of £200K (which you'd be mad to do). You'd then try to negotiate a revised price with the vendor, which would closer match the valuation, be within the mortgage LTV limit and fit with your available deposit.

Please can you answer the top four questions for us? Then we'll be in a better position to help you.

ACG

If you reduce the purchase price then the loan amount may need reducing - this is commonly done but it will not result in £2k in your back pocket to do the work if you are at an LTV threshold.

Good to hear you received your offer, even if it may now need amending.

SusanShaw

Wirenth - Answers are:
1) £207000
2) £230000
3) £230000
4) 90%?

so if the value is reduced to £227,500 then the LTV is 98%?

Mattygroves2

SusanShaw wrote: »

Wirenth - Answers are:
1) £207000
2) £230000
3) £230000
4) 90%?

so if the value is reduced to £227,500 then the LTV is 98%?

Yes and they will only lend up to 90% so your new mortgage amount would be £204,750 and your new contribution required will be £22,750. So you get £250 in your pocket and a reduced mortgage payment in the future.

The risk with getting the vendor to pay for the work is that they will do it as cheaply as possible and you've got no control. Better to pay for it yourself after you've bought.

SusanShaw

Thanks everyone.
It still can't hurt to get a reduced price, would just need the bank to revise the offer. Just might need to find the money elsewhere then.