LTV - Is it really "Value" or "Price"

IncidentalPenguin

I applied for a mortgage at 95‰ LTV but due to covid its been suspended. The Max LTV I can get is 85‰ but there is a quirk in the purchase.  The vendor has the sale of the property capped at its purchase price 15 years ago by court via divorce settlement. The sale price is thus significantly lower than its value.  If we project the value it comes in at 83% LTV and you would think that the mortgage provider would help us progress.  However the mortgage provider only recognise the "sale price" as the "value".   Everyone recognises this is bonkers but they say its process.  Is there any way to get them to reassess this situation or some edge case / or uncommon rule I can quote? Thanks. 

D.L

Look at concessionary mortgages; they're designed for exactly this purpose. Ultimately, you can't force anybody to lend you money.

davidmcn

IncidentalPenguin said:

The vendor has the sale of the property capped at its purchase price 15 years ago by court via divorce settlement.

That doesn't sound very plausible. Does it make sense to anybody else?

Thrugelmir

What's your relationship to the vendor?

lacalladine

I am in the exact same position as you @IncidentalPenguin 
In March 2020 I made an offer on a house based on a 95% ltv agreement in principle.
The house was valued at £202k but had been for sale for a while and reduced to £197k and then £192k. I offered £188k, which was accepted and with my £10k deposit that reduces my mortgage requirement to £178k. Everwhere I have looked online the LTV is calculated on the mortgage required / appraised property value. This would give me an ltv of 88%, however the IFA and banks insist on using the mortgage required / purchase price, which ends up at an ltv of 95%, and hence my mortgage offer has been pulled.

Is this NOT the case in practice? Using the purchase price would seem odd, as the risk is surely on the lender being able to recoup their investment if the worst happens? Less risk in my situation surely as I have £24k equity in the property from the day I purchase. #VeryFrustrated

foxy-stoat

When you buy a property the LTV is loan to purchase price.  When you remortgage it will be loan to value.

lacalladine

that sucks, thanks @foxy-stoat

foxy-stoat

Have you looked into concessionary mortgages as D.L. mentioned?

lacalladine

foxy-stoat said:

Have you looked into concessionary mortgages as D.L. mentioned?

Yeah, but they do not apply to me, I'm afraid.

foxy-stoat

lacalladine said:

foxy-stoat said:

Have you looked into concessionary mortgages as D.L. mentioned?

Yeah, but they do not apply to me, I'm afraid.

Then you are in a sucky position.  Can you put some cash into it so you can get the mortgage at the lower LTV?

davidmcn

lacalladine said:

Everwhere I have looked online the LTV is calculated on the mortgage required / appraised property value.

I think you've been looking in the wrong places. It's pretty universal that the "V" in LTV is the lower of the appraised value and the purchase price (on the basis that the agreed price is more likely to be accurate than the surveyor's estimate - after all, if the vendor hasn't managed to get a higher price, why would the lender if they repossessed?).