Help to buy - Down Valuation and change of lender

owen17

Hi

I need help with the following please.

This post might be interesting for anyone looking into down valuations when buying with Help to Buy equity loans.
I have read several posts from previous years regarding down valuations for houses when an equity Help to Buy loan is taken but I have not seen any specific case like this mine.

I have reserved a house for £300k paying £500.
The house developer asked me to use an specific mortgage advisor, which I have done.
The house will be a leasehold and the developer has made me to sign a non investing clause agreement because the council wants the area to become a community.

The mortgage advisor recommended me a mortgage with a very popular bank, and their surveyor has valued the house in £282k, this is £18k down.

I know from research that Help to Buy requires the valuation to be equal to the price paid for the house so I thought this could benefit me thinking the developer would have to put the price down.

I contacted the developer and they said they would contact me back once they had spoken with the council but wanted to let me know they would appeal the valuation as they think it should be for £300k given “all the previous asking prices in this development matched the valuations”. Additionally, my mortgage advisor who I expect to be independent (although this is relative as they are recommended by the developer) has just contacted me saying he is going to find another mortgage for me given this valuation is wrong.

My main doubts are:
-I have already paid a non refundable product fee for the current lender for £995 based on my mortgage advisor advise.
-Should I say I don’t want to find a second alternative lender if they previously said they would appeal it?
-Is the mortgage advisor being independent?
-What happens if I don’t want to proceed with another lender?
-Should i contact the surveyor and bank on my own?
-Should i contact the council?

Thank you in advanced.
Kind regards

davidmcn

I take it "talking to the council" is about the "non-investing" clause (does that just mean a prohibition against letting it out)? That's probably come from a planning condition - have you checked? If so then there's probably not much chance of it being varied just for your house, assuming it's meant to apply to the whole development.

AnotherJoe

If the tame mortgage company have significantly down valued plus it's a leasehold (lots of issues there) why proceed? You could make a substantial loss many times your lost deposit when you resell

Bossypants

owen17 wrote: »

-I have already paid a non refundable product fee for the current lender for £995 based on my mortgage advisor advise.

It's highly unusual to pay the product fee before you've accepted the mortgage offer in my experience. Are you sure you haven't paid the (usually less expensive) valuation fee? Or have you already accepted the mortgage with the lower valuation, perhaps?

Exodi

Bossypants wrote: »

owen17 wrote: »

I have already paid a non refundable product fee for the current lender for £995 based on my mortgage advisor advise.

It's highly unusual to pay the product fee before you've accepted the mortgage offer in my experience. Are you sure you haven't paid the (usually less expensive) valuation fee? Or have you already accepted the mortgage with the lower valuation, perhaps?

£995 would extremely high for the valuation fee and is typical for a product fee so I guess they must have paid it before accepting the mortgage? I'm astonished the MA allowed this...

This is extremely bad advice by the MA - commonly the product fee is added to the mortgage for this exact reason (should the mortgage not proceed you're not out of pocket), most lenders also retain the old LTV even with the increased balance.

I think you've received very poor advise from your MA...

AnotherJoe

Exodi wrote: »

£995 would extremely high for the valuation fee and is typical for a product fee so I guess they must have paid it before accepting the mortgage? I'm astonished the MA allowed this...

This is extremely bad advice by the MA - commonly the product fee is added to the mortgage for this exact reason (should the mortgage not proceed you're not out of pocket), most lenders also retain the old LTV even with the increased balance.

I think you've received very poor [STRIKE]advise[/STRIKE] advice from your MA...

Unfortunately its not "their" MA

The house developer asked me to use an specific mortgage advisor, which I have done.

Owen, cut your losses and walk away and next time do your homework first even if that's just asking here. Sorry you've been ripped off (well, that's how I see it anyway)

Thrugelmir

owen17 wrote: »

The mortgage advisor recommended me a mortgage with a very popular bank, and their surveyor has valued the house in £282k, this is £18k down.

New builds are often overpriced. What incentives are on offer?

kingstreet

owen17 wrote: »

My main doubts are:
-I have already paid a non refundable product fee for the current lender for £995 based on my mortgage advisor advise.
-Should I say I don’t want to find a second alternative lender if they previously said they would appeal it?
-Is the mortgage advisor being independent?
-What happens if I don’t want to proceed with another lender?
-Should i contact the surveyor and bank on my own?
-Should i contact the council?

Who is charging non-refundable product fees?

It is normal to investigate the unusual downvaluation on a site when the other properties have reached their agreed prices. It usually only happens when a locum/out of area surveyor comes in for a one-off inspection.

This can be in the form of an appeal, or the lender's newbuild manager speaking to the survey firm.

Brokers are often asked about looking at alternative lenders who use different surveyors in such circumstances. See what they come up with.

What the broker is being asked to do is not indicative of anything other than a willingness to try to keep the sale/purchase alive. As you say, on HTB the valuation and price has to agree and if the builder won't sell it £18k cheaper, you have the immovable object and irresistible force.

We do this when necessary and it doesn't compromise our independence. You make the final decision. We simply provide the facts.

You will get nothing from the surveyor as their contract is with the lender. The lender will refer you to the broker.

The council? Can't see what that would achieve. Is the downvaluation due to a S106 Agreement causing an issue?

owen17

Thanks a lot for your response. I mean with that sentence just asking the council if they are aware that all this is happening, mainly as urveyor from Santander bank valuing the property at £282k when the developer is asking for £300k and once they knew the down valuation asking me to change the lender. Firstly the developer said to me they would appeal and now three days later my MA says he has talked to them and I have to change the lender.
I knew from the beginning it was a leasehold with a non investing clause although I am not sure if the surveyor took that into account as I cannot see anything in his report apart from ticking “No” in the Property to let cell in the form (which could make the valuation even more down in my opinion).

owen17

Thanks for responding.
I want the house to live in, not for investment purposes. However I obviously want to buy something for its real value (including all the constraints of leasehold and non investing clause)

davidmcn

owen17 wrote: »

Thanks a lot for your response. I mean with that sentence just asking the council if they are aware that all this is happening

I doubt the council will care, unless they have some interest in the site we don't know about. If the planning condition causes the developer serious problems with sales then the council might agree to amend it, but that would require a formal application to the planners.