Borrow more if getting good deal on a house

Sibvantage

Hello.

Me and my partner are first time buyers and we're looking to purchase a house for £110,000. The house has just been valued at £130,000 but the seller is looking for a very quick sell. Our mortgage will be a 90% mortgage but we would like to borrow £5,000 extra for home improvements.

Seeing as the house is worth £130,000 and we're only buying at £110,000, would the lender allow us to borrow an extra £5,000?

Thanks

AnotherJoe

Maybe, maybe not. Depends what they are prepared to loan you. It may be that £110k is as much as you can borrow? Also it will affect your LTV and possibly put you on a more expensive rate.

BTW neither sum, 110 or 115 will be a 90% mortgage ! That would be £117k.

Thrugelmir

Who has valued the property at £130k?

ThePants999

Your borrowing constraints are primarily (a) LTV and (b) affordability. You'll basically get the lowest of these criteria. It's the bank's valuation that matters for LTV, though, so the question of "who said it was worth 130?" is important.

Yorkie1

Your mortgage will be based on the actual sale/purchase price, i.e. £110K, and not the original valuation.

So on a LTV of 90%, you will only be able to borrow a maximum of £99K.

Sibvantage

Thanks for all your responses. At this point two estate agents have given their valuation report which I know is nothing set in stone but their estimates were around £135,000 so I take that with a pinch of salt.

I was hoping that because the market value is nearer to £130,000 and I only actually want to borrow £103,500 (£115k - £11.5k deposit) that would be okay. But am I right in saying (as Yorkie1 said) that the mortgage lender will only look at the purchase value when calculating LTV, not the market value? That would mean that borrowing £103,500 on a £110,000 house would have an LTV >90%.

AnotherJoe

I believe in some circumstances, with a really big discrepancy, they will take an assessed value rather than the actual purchase price into effect.i think you'd need a good broker to find such a lender in this case.

foxy-stoat

As this is your first time house purchase, keep the numbers as low as possible and save.....yes save......to carry out decorations, carpets and other stuff.

Good lucks

kingstreet

Lenders use purchase price or valuation, whichever is the lower.

That's a RICS surveyor's valuation, not a marketing appraisal by an estate agent.

Surveyors use comparables. That's the recent (last four months) sold prices of similar property in the vicinity, upto 0.5 miles away.