First time buyer equity query

Trekstarjd

Hi, my wife and I are first time buyers and have just had an offer accepted on a house that was £33k less than the home report value (involved a fair amount of haggling but vendor is desperate for a quick sale).

My question is can we use this £33k equity we would have in the property to increase our chance of getting a 5% deposit mortgage? Also, is it 5% deposit of purchase price or the home report value?

We have an appointment with our mortgage broker next week but just curious what our options are with the great deal we managed to get.

Thanks in advance for any advice.

davidmcn

If the agreed price is lower than the valuation then that's what the bank will use as the value. After all, if the bank repossessed then they'd want a quick sale too, so the price you've agreed is probably more accurate than whatever the surveyor thought it was worth.

scholesfan88

The straight answer to your question is no.

The value given to the lender is that which you've agreed the sale for. Any property valuation done by the lender is pretty much to ensure that they can recoup they're money should you not be able to keep up with payments and that it's a good investment.

csgohan4

OP do you have the 5% deposit at present? did you account for fees and moving costs?






When you apply for a mortgage they want the deposit when you apply

foxy-stoat

When buying it is the purchase price. When you re-mortgage you can get an up to date valuation.

phillw

Trekstarjd wrote: »

Also, is it 5% deposit of purchase price or the home report value?

As a first time buyer your equity is going to be your deposit and LTV will be calculated as a percentage of the purchase price.

The lender will send someone round to make some huge assumptions as to whether the house is worth what you're paying for it.

You will pay stamp duty on the purchase price, land registry publish the purchase price and it's figured into the calculations the next time someone tries to guess what value to pin on a house in that area.

When your deal comes to an end and you decide to stick with the same lender, they calculate the LTV by adjusting the purchase price by some average percentage for your area which ignores every single detail about the house. At least that is what Nationwide did, I only took out the original mortgage and stayed with them after the deal ended until I paid for the house.

davidmcn

phillw wrote: »

The lender will send someone round to make some huge assumptions as to whether the house is worth what you're paying for it.

"Home Report" = Scotland i.e. the seller's survey. It's already been valued, so (unless the Home Report surveyor isn't on the lender's panel) there's not going to be a further valuation by the lender.

phillw

davidmcn wrote: »

"Home Report" = Scotland i.e. the seller's survey. It's already been valued, so (unless the Home Report surveyor isn't on the lender's panel) there's not going to be a further valuation by the lender.

It doesn't seem to be so clear cut.

https://forums.moneysavingexpert.com/discussion/5235509/scotland-do-some-lenders-accept-the-home-report-mortgage-valuation#5

I am currently going through a very long winded process with Natwest who have the home report for the house I am hoping buying but are refusing to use this report due to fact I am buying lower than the market value!!! Now have to wait on a surveyor to survey the house. I think it depends on the lender.

Buying £33k lower than the value might seem to be a red flag to a lender.

https://www.cml.org.uk/consumers/buying-a-home/guide-to-buying-a-home-in-scotland/

A mortgage valuation is not an extensive survey and will not necessarily identify all the repairs or maintenance that might be needed.

They will know that you managed to drop the price by £33k, they can't know whether this was down to desperation or if you noticed a problem with the property that you have estimated will cost £33k or whether your estimate is correct.

And that is if they are on the panel.