Mortgage down valuation- now need to pay more deposit ???

amybenjaminandemilysmum

Hi there.
I am looking for some advice.
We have made an offer on a house which has been on the market for £132,000. We have offered the full asking price.
I have been given a mortgage offer by Halifax- pending their surveyors report with an 85% LTV
My mortgage advisor has contacted me to say that the house has only been valued at £130,000 so I have put this to the vendor who has requested a copy of the surveyors report.
However my mortgage advisor has told me that I would need to stump up an extra £1700 if I was to offer £130,000
This is how he has explained it to me:
Original offer = £132, 000 at 85% LTV means £19,800 deposit and £112,200 mortgage
New offer = £130,000 at 85% LTV means £19500 deposit and £110,500 mortgage.
But I have been told I would have to pay the difference between the two mortgage amounts which is £1700... anyone know why?
Thanks in advance
Amy

kingstreet

If the purchase price becomes £130,000 and you still want an 85% mortgage (or that is the max LTV Halifax will offer you) the maximum mortgage amount is £110,500 and your minimum deposit is £19,500.

If you want to put down a smaller deposit, the LTV would then be over 85% and you would probably have to choose a new and worse product.

I don't understand the significance of this £1,700?

glentoran99

is your advisor assuming that the vendor wont reduce price? and you are still buying at 132k?

kingstreet

If you decide to continue and pay £132,000 for the property, this is where the £1,700 appears.

£132,000 less 85% of £130,000 (lower of purchase price or valuation) is £110,500 so your deposit is £21,500, £1,700 more than your original £19,800 deposit.

amybenjaminandemilysmum

I asked the mortgage advice the same questions you are asking me.
I was told:

If you go in at £130,000 you need to find the £1700 extra and if you go in at £132,000 then you would need to find the extra £2000 (because the mortgage company (Halifax) values the property at £130000)PLUS this £1700....

Sorry if I am being vague but the mortgage advisor isn't explaining it very well.

glentoran99

ask him to explain the 1700 extra if what you are paying is the same as Halifax's valuation?

kingstreet

As stated, if you pay £130,000 your minimum deposit is £19,500.

If you pay £132,000 your minimum deposit is £21,500.

This is because in each case, Halifax is lending only 85% of £130,000.

amybenjaminandemilysmum

Just to clarify we have now offered £130,000 not £132,000 in view of the valuation.

A 15 % deposit on £132,000 is £19800
A 15% deposit of £130,000 is £19500

So why is my mortgage advisor saying I need to pay £21200 deposit on £130,000 because this is more than 85% LTV?

glentoran99

amybenjaminandemilysmum wrote: »

Just to clarify we have now offered £130,000 not £132,000 in view of the valuation.

A 15 % deposit on £132,000 is £19800
A 15% deposit of £130,000 is £19500

So why is my mortgage advisor saying I need to pay £21200 deposit on £130,000 because this is more than 85% LTV?

Have you clarified with the mortgage advisor that you aren't paying 132k?

amybenjaminandemilysmum

Yes I have clarified this twice with him and he is still telling me the same thing.

kingstreet

amybenjaminandemilysmum wrote: »

Just to clarify we have now offered £130,000 not £132,000 in view of the valuation.

A 15 % deposit on £132,000 is £19800
A 15% deposit of £130,000 is £19500

So why is my mortgage advisor saying I need to pay £21200 deposit on £130,000 because this is more than 85% LTV?

The purchase price doesn't dictate the loan amount. The valuation does. So if you pay £132,000 on a property worth £130,000 the maximum mortgage is 85% of £130,000 or £110,500. Then you need £132,000 - £110,500 = £21,500 deposit.

Now the purchase price and valuation are the same at £130,000, the deposit is 15% of both those figures, £19,500.