Mortgage for £40k flat?

Casual_Bystander

Hi all
Friend at work has been offered to buy their council flat at a hefty discount. Problem is they need a small mortgage on a low value property. Flat is apparantly only worth £40k, they can buy for £18k and want to borrow £18k. I thought they's run into issues getting a 100% mortgage (borrowing same as purchase price), but they've said they've been told that's not an issue. He's been into halifax but got told no as they won't lend on properties under £50k. What and/or where are his options? Any lenders that would be ok with the £40k value and the 100%? Broker?
Thanks
Cas

kingstreet

Halifax intermediaries website still showing minimum valuation as £40k so don't know where £50k has come from?

Dandytf

not sure if what I had is relevant to what your asking.

My 1st flat 2003 was purchasedeith a Halifax 100% mtg -I remember I paid and additional security fee (within a few months) 21k 100%mtg@4.75%

Since sold it and moved after 6 yrs, no regrets at all.

Best of luck worth pursuing if you need a place of your own.

silvercar

The words "council" and "flat" in the same breathe may cause a problem for some lenders, they may need to consider how high the block is, how high the particular flat is, what percentage are bought, whether the entrance is from an indoor or outdoor passage.....couple all that with a low value and lots of lenders will run.

Casual_Bystander

dfub wrote: »

If the flat is worth £40K but they can buy it for £18K, surely this only makes it a 45% loan?
Or am I oversimplifying it?

Lenders usually base LTV on the lower of the value and the purchase price, which is nice of them. I told him that, but he said Halifax told him that's not a problem.

silvercar wrote: »

The words "council" and "flat" in the same breathe may cause a problem for some lenders, they may need to consider how high the block is, how high the particular flat is, what percentage are bought, whether the entrance is from an indoor or outdoor passage.....couple all that with a low value and lots of lenders will run.

It would only be a 2 story block with 4-8 flats in.

He's going to talk to a few more lenders and see what happens, don't think he's too fussed either way. I think he'd be mad not too personally, £40k flat for £18k.

Cas

silvercar

Lenders usually base LTV on the lower of the value and the purchase price, which is nice of them. I told him that, but he said Halifax told him that's not a problem.

A lot of lenders will view the RTB discount like a gifted deposit. So the LTV will be on the full price.

There may be minimum income levels. For a price of 18k I am wondering if unsecured loans could reach it.

It would only be a 2 story block with 4-8 flats in.

He's going to talk to a few more lenders and see what happens, don't think he's too fussed either way. I think he'd be mad not too personally, £40k flat for £18k.

Check there isn't any grand refurbishment of the block or area as owners will have to contribute, with only a few flats to share the burden the price could be hefty.