Mortgage valuation higher than purchase price

PaulC5

What are the chances of the mortgage company (Santander in this case) valuing our new property higher than what we have paid for it?

Would they then offer us a lower rate if it dropped us into a lower LTV percentage?

We are put in this scenario because we believe we have bought it at a discounted price because the inside needs cosmetic work doing to it.

Is it realistically not going to happen like that?

Thanks
Paul

HouseBuyer77

No chance. The valuer is basically confirming to the bank that the value they are assuming for the house (i.e. the purchase price) is sensible. If it's not sensible they will value under.

Your actual mortgage is based on the purchase price anyway (i.e. if you negoiated down from the initial agreed price and mortgage valuation the mortgage is based upon the final price).

If you bought at discounted price because it needs work then that reflects the current value of the house. so even a 'blind' valuation that didn't know your purchase price would still put it at a discount compared to the same house that didn't need work.

westernpromise

No. The LTV is based on what you're borrowing versus what you're paying. The value is just so they can get comfortable with whether the house can be sold for enough to cover the debt if they have to repossess.

I've always found that lender valuations come in below what you're paying and that when you ask where the same thing can be had for the right price, i.e. less money, they cannot say.

Broadly speaking it is in the lender's interest to undervalue. If you're paying £200k and they say it's only worth £170k, then if you default, they can sell it fast well below true value (at £170k) and then point to their survey as evidence that they got what it was worth.

Surveyors know what's expected and I think it's unlikely they'll overvalue if they want to keep the business.

I've bought four properties and sold three and in all seven cases the lending valuation came in below agreed selling price.

PaulC5

OK thats fine, wishful thinking I suppose.

When our mortgage fix term is up and we have got the house back to the same standard as the rest of the street then we could have a new valuation done and our LTV should increase significantly at that point?

Hoploz

Yes and if you are not in any tie-in period you could then remortgage for a better rate which is sometimes attainable with a lower LTV. (It would not affect the current mortgage though, just if you changed to a different one)