Paying less than the home report value

Aleksmac

We've recently had an offer accepted for £6k less than the value stated on the home report.
What happens to that £6k difference? will our lender consider then real mortgage value to be what we paid? 
For example, for easy maths lets say the HR valuation was £100k our offer was £90k and we need to put down a 15% deposit on our borrowings which would be £13.5k - do we "technically" have £23.5k equity in a £100k home? and therefore qualify for 80% LTV mortgage?
I know that if the shoe was on the other foot, lenders would only allow you to borrow up to the home report value - so for example, if we happened to pay £106k, on a property valued £100k, we'd need £15k deposit, plus the additional £6k we put down - I'm just wondering if it goes both ways. 

davidmcn

Aleksmac said:

We've recently had an offer accepted for £6k less than the value stated on the home report.
What happens to that £6k difference? will our lender consider then real mortgage value to be what we paid? 

Yes, they'll always use the lower of the valuation and the agreed price.

Falafels

Ages ago, my home buyer's report estimated the value at slightly higher than the price I was paying. This was academic. They could have valued it at 100% above what I was paying, and it would still have been academic; it could only be a problem if it had been valued at less than the value of the mortgage I'd applied for - the lender will want to know that they will recoup the debt if the house needs to be repossessed, say, at a later date.

So, to get back to your example... your offer, the amount you will be paying, is £90k. Your 15% deposit is £13.5k. These are concrete, fixed sums. There's no such thing as a real mortgage value in the way you describe; the housing market could slow down in the near future, and a mortage valuation of your house could drop to £80k; a few months after that it could rise again to £100k. Different valuers will likely come up with different figures, too.

So, sadly, it doesn't go both ways. Lenders want to make sure they don't lose out - that's all - and the percentage deposit they want you to put down is there to cushion them, to protect them against a future property market slump.

Aleksmac

Falafels said:

 There's no such thing as a real mortgage value in the way you describe; the housing market could slow down in the near future, and a mortage valuation of your house could drop to £80k; a few months after that it could rise again to £100k.

This is what I struggle to understand. LTV = is the value what we offer, or what the surveyor advised was the mortgage valuation? 

davidmcn

Aleksmac said:

Falafels said:

 There's no such thing as a real mortgage value in the way you describe; the housing market could slow down in the near future, and a mortage valuation of your house could drop to £80k; a few months after that it could rise again to £100k.

This is what I struggle to understand. LTV = is the value what we offer, or what the surveyor advised was the mortgage valuation? 

Like I said above, it's the lower of those. So in your case, it's what you offered.

ThePants999

A house doesn't really have "a value" - it has a set of values different people would pay for it. The bank wants a decent level of confidence about what they might be able to sell it for if they had to repossess. They have two data points on that - an expert's opinion, and an amount that someone (you) actually IS happy to pay for it, which the seller is also happy to sell for. Both of those are pretty good pieces of data, and as banks are always conservative, they take the lower one