If you negotiate a price down, do you need a new mortgage offer?

leftism

I'm halfway through a purchase (mortgage approved, survey done). But everything is paused, as we know. 
If, when things start moving again, the market looks a lot worse, things are cheaper and I try and get a few % knocked off the price, would that mean having to get a new mortgage approved? Or does it not work that way if they are going to be lending you the same/ less?
Obviously, with the way things are with mortgage offers right now, that might be a risk and we maybe be better off sticking to the pre covid price. 

Cheers!

JustJane101

I believe you will need a new mortgage offer

pinkteapot

Yes, but you shouldn't need to go through the whole application process again. The bank should just send it back to the underwriters with the updated info and they'll take a view. If the market has moved though, I don't know if they can insist on a new valuation being done? 

Thrugelmir

The vendors might not agree to a price reduction and abort the transaction. 

AdrianC

You were buying the house for £200k, with a £180k mortgage. That's 90% LtV.
You negotiate the price down to £180k.
If you don't tell the lender, they'll continue to lend £180k - after all, they know no different, right? So that's now 100% LtV...

In practice, your solicitor knows how much to send to the vendors (because it's in the contract, and because you don't want him sending too much, do you?)... and he also acts for the lender.

Crashy_Time

Thrugelmir said:

The vendors might not agree to a price reduction and abort the transaction. 

True.

DudeFTB

Hi,

I'm in the same position right now.

Spoke to our lender (Bank of Ireland) earlier today.

They confirmed that if we renegotiate a lower purchase price with the vendor, the lender only needs to amend the amount they are lending and send the amended details to all relevant parties.

No need for any additional documents or new valuations.

The terms and conditions of the mortgage remain the same, only the lending amount is reduced.

Our lender is happy to do it because you we would be buying the same house with the same deposit, but borrowing less money for it, i.e. effectively reducing the original LTV ratio.

In my situation, we are considering to reduce the original agreed house price (326k) as we only have a 20k deposit (94% LTV) or pull out of the purchase.

If house prices go down over the next 18 months when our fixed mortgage offer expires, we may find ourselves in the negative or, at best, with a LTV at or above 95%.

Even in the best case scenario, we won't be able to remortgage at the end of the deal due to LTV being too high. That means paying a SVR which now stands at 4.24% and who knows what in 18 months time.

Not a great deal to commit to at this time.

Crashy_Time

You need a bigger deposit.