Mortgage valuation less than purchase price

glosoli

It must be right, unless Help to Buy works differently than all other house buying finance (i.e always going by the lower of the purchase price or valuation). Would be interested to learn if this actually was the case.

GDB2222

Do Nationwide get a first charge over the whole property? In that case, they are only lending roughly 50%, so they're happy.

Will the HTB lenders be happy, though?

And, I'd be doubtful about spending £40k over the valuation.

twink1108

As far as I'm aware, glentoran's calculations are correct. Its TW who have set that price and I don't think that any valuation is done for the HTB loan. I'm assuming that TW would have to agree sale prices before launching the houses. I'm very reluctant to pull out of the sale seeing as we've waited for a year already and as mentioned, my other half actually camped to get one (there's another launch on Thursday and people have been camping since Thursday just gone - an entire week!!!). But then I also appreciate that other people are in the same desperate boat that we are, in that they can't afford to buy anything without using the HTB.

I am assuming that the HTB, being an equity loan, would decrease should the value of the property decrease? Or has anyone heard differently, as in, they make you pay back a minimum of what they initially lent?

glentoran99

GDB2222 wrote: »

Do Nationwide get a first charge over the whole property? In that case, they are only lending roughly 50%, so they're happy.

Will the HTB lenders be happy, though?

And, I'd be doubtful about spending £40k over the valuation.

They are only lending 40% of the valuation so why not?

glosoli

glentoran99 wrote: »

They are only lending 40% of the valuation so why not?

I think this is the crux of the issue really, it appears to me the original posters mortgage adviser is saying the Help to Buy loan is 40% of the purchase price, and suggesting there is no shortfall. Should they be working from the mortgage valuation, there certainly is a shortfall, based on the figures discussed.

twink1108

The part I am confused about is whether or not the HTB lenders have pre agreed the sale price with the developers - surely they would have, as I am not aware of any valuations that they need to do (I don't remember them doing any valuations on the flat we have now!). So if they HAVE pre agree it, then I am guessing that the 40% that they are lending will stay as it originally was?!

glentoran99

twink1108 wrote: »

The part I am confused about is whether or not the HTB lenders have pre agreed the sale price with the developers - surely they would have, as I am not aware of any valuations that they need to do (I don't remember them doing any valuations on the flat we have now!). So if they HAVE pre agree it, then I am guessing that the 40% that they are lending will stay as it originally was?!

that would make sense

Thrugelmir

twink1108 wrote: »

They're not changing their lending criteria and we can still get a mortgage to cover us up to £600k but they've just valued it as less than we're buying for. I don't really know what it all means but I have been reassured by my mortgage advisor that they're still lending us the same amount.

Have you reached your borrowing ceiling?

Seems a large affordability jump to go from £400k to £600k even with HTB.

twink1108

It is the top of our lending budget unfortunately. And not what we'd initially planned to do but because we're in london, we can use the 40% equity loan so that's a big portion of the property. Again, not ideal but we are in a bit of a rut otherwise!!

Cakeguts

twink1108 wrote: »

As far as I'm aware, glentoran's calculations are correct. Its TW who have set that price and I don't think that any valuation is done for the HTB loan. I'm assuming that TW would have to agree sale prices before launching the houses. I'm very reluctant to pull out of the sale seeing as we've waited for a year already and as mentioned, my other half actually camped to get one (there's another launch on Thursday and people have been camping since Thursday just gone - an entire week!!!). But then I also appreciate that other people are in the same desperate boat that we are, in that they can't afford to buy anything without using the HTB.

I am assuming that the HTB, being an equity loan, would decrease should the value of the property decrease? Or has anyone heard differently, as in, they make you pay back a minimum of what they initially lent?

I am not sure about not being able to buy anything without the HTB. New property has a big premium on it and HTB lets the developers put on an even bigger one. The risk is that you won't be able to sell without making a huge loss.