Valuation Survey Query

gammyleg

Hi,

Hypothetical scenario:

A property has been advertised at £250000. The vendor has accepted an offer for the full asking price. The buyer requires a mortgage of £125000 ( 50%) and his lender arranges for a valuation survey to be carried out.
The survey concludes that the property is worth only £240000.

Question:

Will the lender still offer the £125000 or will they reduce their mortgage offer to £120000 ( 50%)

Hope that makes sense.

AdrianC

It depends on the lender.

£125k mortgage on £240k valuation is 52% LTV instead of the expected 50%.

G_M

Depends if the change in LTV exceeds the terms of the mortgage product.

With that level of borrowing it is unlikely to be an issue so the lender would probobly still offer the loan requested.

However if the interest rate for that product was based on a loan of no more than 50%, the the increase to 52% would make the borrower ineligible for that product unless the loan was reduced.

kingstreet

The lender won't offer anything until the applicant confirms what the purchase price is going to be. This is because many applicants will try to renegotiate the price based on the results of the mortgage report & valuation.

Then it will apply the LTV banding to see if the product has to be changed as it will base lending on the lower of new purchase price or valuation.

gammyleg

Thanks for all your replies.