Bank have over-valued my property!?

robertscottphoto

Hi folks,

I need some clarity here.
We currently have about 89k remaining to pay, our property was valued at 98k and we mortgaged 93k (95%LTV)

I've just spoke to the bank who have said they would remortgage the property based on 106k. My question is "why?". This doesn't make much sense to me. When I prompted them for more information they said that it's a figure the bank would use and that I wouldn't see it on any of my existing paperwork. Can anyone shed some light on this? Seems very odd.

Surely they don't gain anything as the interest is calculated on the remaining balance.

[Deleted User]

It's very good news for you, especially if it changes your LTV.

Why are you worried about it?

nyermen

They may have received an updated valuation for some reason, depending on what valuation lists they use. Nothing to worry about.

For note - An increase in valuation wouldn't affect you for your mortgage, but anyone who has over 75% LTV, the bank would benefit from in terms of their regulatory requirements, as an increase in value reduces the amount you owe that is above the 75% LTV (which attracts a higher regulatory capital).

They may also be willing to consider a higher re-mortgage...

spadoosh

Theyll probably use some house price index.

A bit like zoopla. It cant actually know the value of the property until it sells. Its uses a house price index (a collaboration of sold prices in an area) to speculate on rises.

Id imagine if you went on zoopla, you should see something similar?

They dont gain anything, you do. It has the potential to put you in better rate brackets ie youre now below 90% LTV. Where as if they used your figures you would probably still be over 90% LTV and stuck with rates offered to them.


Its a good thing. But obviously dont rely on it as 100%.

robertscottphoto

@zx81 the main reason I found it concerning was that I don't have 106k on paper anywhere. I don't know why but a desktop valuation just seems iffy to me. Maybe I'm paranoid but I thought that maybe the banks do it for their own gain.

@nyermen thanks for that info, that's handy to know. As mentioned in the above reply to zx81, I thought that the bank may do it for their own gain - possibly to have me borrow more than I actually require.

TrickyDicky101

robertscottphoto wrote: »

... I thought that the bank may do it for their own gain - possibly to have me borrow more than I actually require.

You could always do a Zammo and just say 'no!' [...I don't want to borrow any more money]

kingstreet

It is completely normal for lenders to re-value property using an indexed valuation for customer retention products. Those are what is offered to existing borrowers whose deals end, not a remortgage.

As a result, borrowers get lower rates due to the reduction in their loan to value - what they owe has fallen and the value of their home has increased.

All good.

Imagine if lenders based the customer retention product on the original mortgage amount and original valuation?

dunstonh

but I thought that maybe the banks do it for their own gain.

A valuation higher than expected is a) nothing to do with the bank as they use a valuer or system. Its a not a bank clerk trying to get a target. b) not going to increase any income for them. c) could actually decrease their income if you move into a lower interest tier.

davidmcn

Banks make money by overvaluing their mortgage portfolio? Have we all forgotten 2008?

Thrugelmir

davidmcn wrote: »

Banks make money by overvaluing their mortgage portfolio? Have we all forgotten 2008?

Don't make money as such. What it does determine is the amount of capital that they must hold on their balance sheets. Most likely this form of valuation is conservative across the entire lending mortgage book. Also the most cost effective method.