Bizarre valuation situation

Fiesto88

I have a family member who found themselves in this exact situation. She originally applied directly to the lender online, with no advice and hit the same brick wall as you. The underwriter pointed them to a branch (it was a high street bank). The mortgage adviser then worked with the underwriting team to understand the options and this is what ended up happening.

- She explained the situation in full to the builders and agreed to provide enough payment to cover the cost of the essential works needed to satisfy the valuer that the mortgage security was suitable.
- Bank provided a personal loan to cover this
- Mortgage application resubmitted when the required work was done and a suitable valuation obtained. (Exact same application except with £10k of the funds for debt consolidation)
- Mortgage was then agreed with a lending condition that £10k of the funds would be retained by the bank to repay the personal loan.

As somebody else mentioned, it would require an adviser to pull off as they'd need to make sure you fit the lending criteria for debt consolidation requests.

If at all possible, I'd be speaking to the lender directly to see if they can find a way round (if you haven't already)

CRIMPY

Thanks. Spoken with lender directly, they're basically in the world of "we know it's daft, but 'computer says no'. Speaking with own bank today to find another solution.

ACG

I think you have answered your own question. It is a sausage factory, that is what helps to keep the costs down.

There are lenders who would do what you want, but they would charge more for the privilege of having the ability to discuss the case with an underwriter.

Credit-Crunched

CRIMPY wrote: »

I sort of get that, but they'd only have to sell it for around 20% of its value to recover the debt - surely that's "easy"?

But more to the point, had they turned up four days earlier to value the property, they'd have issued the mortgage, in full knowledge that we were about to rip out the bathroom, kitchen , etc. The only difference is that they turned up four days later, and suddenly that means they can't lend. The risk to them is absolutely identical in both cases. I know (unfortunately too late) that's "how it is" but in this cases it makes no sense from the lenders perspective. Under no circumstances could they be left with an asset that wasn't easy to sell for considerably more than any debt owed. The reality is that we're just dealing with a big machine, rather than intelligent decision makers. No human in their right mind would see a material difference in lending 4 days before the works starts vs four days after, for a 20% LTV mortgage.

I do understand your view, maybe a different analogy may show it from the lenders perspective.

I am selling an Audi A3 worth 30,000 great condition, I have to sell it quickly so I accept 23,000. However, I had to use a well know car sale site, who took 1,000. In no time my 30,000 asset is worth 22,000.

Now imagine trying to sell that A3, in great condition, but has no engine in it. We all know that to install a new engine is straightforward but costs 10,000 as it needs to be running properly.

So now my 30,000 asset is now worth 12,000.

May appear like a strange comparison, but one needs to see the actual options available to the lender. Legal fees, revaluations and putting the property right costs. They don't have to take the business, and can be selective.

CRIMPY

ACG - which lenders? "more" in this case is all relative - I can easily pay this off in 5 years or less. Unless we're talking Wonga, a mortgage that costs a bit more might be the best of a set of less-than-ideal solutions.

Another question - does anybody know what the "habitable" typical criteria are? (i.e. at what point could we get a value).

ACG

There are potentially 2 options:
1) Bridging loan for a month or 2 or 3 - however long you need it. Then you can remortgage on to the high street. Bridging loans will be about 0.6% per month plus a 2-3% fee.

2) A lender who is more open to treating cases individually - typically this would be the smaller building societies but it would not necessarily be limited to them.

I can not name lenders on here, we can only offer generic help and advice. Has your broker not suggested an alternative?

It would come down to figures involved. You need someone to sit down and do the sums with you really.