house down valued - confused

Thrugelmir

green_pea_2 said:

hazyjo said:

Surely it's been valued at £187k not £200k? Or did you mean EA when you said surveyor?

I'd be far more likely to drop the price as a result of a down-valuation than a survey. Use it and try. Do you have the cash to make up the difference if they won't drop or will only agree to drop a percentage?

 I feel for the vendors as they'll have trusted the EAs optimistic valuation and they may need the full amount. 

EA's have no control over the offers that are made. Normally the advertised price is at the top end of expectations. With the agreed price somewhat lower. 

goodwithsaving

Redwino222 said:

The banks valuation really only impacts people who have a small deposit.  It is the downside of selling to first time buyers.  The upside is they are chain free.

I don't actually agree with this. For example, I have a 52% LTV application but am putting in every penny and borrowing the most I can (before Crashy jumps down my throat, I know the area - it isn't cheap - and I will never have to move again). Therefore there isn't a slush fund to pay a potential shortfall between the valuation and offer price.

Just to point out that those with large deposits can have equally limited leverage...

Redwino222

goodwithsaving said:

Redwino222 said:

The banks valuation really only impacts people who have a small deposit.  It is the downside of selling to first time buyers.  The upside is they are chain free.

I don't actually agree with this. For example, I have a 52% LTV application but am putting in every penny and borrowing the most I can (before Crashy jumps down my throat, I know the area - it isn't cheap - and I will never have to move again). Therefore there isn't a slush fund to pay a potential shortfall between the valuation and offer price.

Just to point out that those with large deposits can have equally limited leverage...

But if you are only borrowing 52% of the value of the house - will the bank lend you less if you are actually borrowing say 55%?

goodwithsaving

Redwino222 said:

goodwithsaving said:

Redwino222 said:

The banks valuation really only impacts people who have a small deposit.  It is the downside of selling to first time buyers.  The upside is they are chain free.

I don't actually agree with this. For example, I have a 52% LTV application but am putting in every penny and borrowing the most I can (before Crashy jumps down my throat, I know the area - it isn't cheap - and I will never have to move again). Therefore there isn't a slush fund to pay a potential shortfall between the valuation and offer price.

Just to point out that those with large deposits can have equally limited leverage...

But if you are only borrowing 52% of the value of the house - will the bank lend you less if you are actually borrowing say 55%?

We'll find out next week ;-) Although I can't actually borrow anymore.

(EEK!)

Redwino222

I am probably being really dim here, but I understand why a down valuation impacts someone who has a tiny deposit and is at the maximum lending level, but why would it impact you?  Why would you have to borrow more or find more money?

You are still paying the vendor the same price, you are still borrowing the same amount and using the same amount of your savings, your LTV just shifts a little (and probably not even enough to change the deal they will offer you)?

I am sure there must be something blindingly obvious I am missing

Keswick1uk

I thought the same.  Unless the calculation now breaches say 60 percent LTV and the deal was based on that, I can't see the issue if the buyer is happy with his forever home and he has the affordability for that mortgage 

MobileSaver

green_pea_2 said:

there's no way I'm pumping my savings into this purchase - especially if a surveyor has explained they have plenty of very recent comparable data to show we're definitely overpaying.

I guess this just shows that we are all different. I'd be the opposite and initially thinking why wouldn't you pump your savings into a home that was "in a great location, and in good condition. Really cute inside, lovely garden"?

Presumably your answer is that there are currently comparable homes in that location that are cheaper? In which case my next question would be why did you choose the property with the "optimistic valuation"... ?

goodwithsaving

Keswick1uk said:

I thought the same.  Unless the calculation now breaches say 60 percent LTV and the deal was based on that, I can't see the issue if the buyer is happy with his forever home and he has the affordability for that mortgage 

Am I being really dim? So, house is say, 500k and gets valued at 480k. Bank will only lend 250k which is 50% when I had requested £260k which is 52%.
I don't have 10k in the bank to make up the shortfall as everything is going into it, and I'm borrowing the maximum possible.
What happens then? (I've never cut it this tight before so genuinely- please do teach me! Hypothetical figures so as to keep all anonymous)

AdrianC

goodwithsaving said:

Keswick1uk said:

I thought the same.  Unless the calculation now breaches say 60 percent LTV and the deal was based on that, I can't see the issue if the buyer is happy with his forever home and he has the affordability for that mortgage 

Am I being really dim? So, house is say, 500k and gets valued at 480k. Bank will only lend 250k which is 50% when I had requested £260k which is 52%.
I don't have 10k in the bank to make up the shortfall as everything is going into it, and I'm borrowing the maximum possible.
What happens then? (I've never cut it this tight before so genuinely- please do teach me! Hypothetical figures so as to keep all anonymous)

Their lending cap is far more likely to be £250k than 50%, because of earnings multiples etc.

They will still lend you £250k. It's just that they'll view that £250k as being on a £480k property (so 52%) rather than a £500k one (50%). You are still putting in the exact same £250k equity yourself, and borrowing the exact same £250k from them.

The risk difference between 50% and 52% LtV is zero. It's a very low-risk loan. They just don't think you can afford to repay more than a £250k loan if economic conditions change, according to their affordability stress-test calcs.

Salemicus

Offer is for £500k. You have £240k and are looking to borrow £260k. 52% LTV.

Bank does its valuation. Says it's only worth £480k. But they are still happy to lend you £260k because that is still just as affordable for you. So LTV now 54% (260/480).

Downvaluation matters because:
* Making the LTV worse might mean your deposit is too small for the bank to lend (won't affect you,  might affect OP).
* Making the LTV worse might push you over a threshold and make the interest rate higher (won't affect you, would affect OP).
* Bank's lower valuation suggests this might not be a prudent investment (but who knows, it's not an exact science).