[Buying] How do people afford offers over asking price?

Norman_Castle

Your deposit plus what a mortgage lender will lend you is what you can afford. If you are planning to offer over a mortgage valuation you need to separate that money from the deposit.

user1977

There isn't really a distinction in terminology between the "deposit" as you're calling it (i.e. the minimum amount of equity which the mortgage product requires you to contribute), and what you're calling the "offer over the valuation". The whole of your equity is just "the deposit".

I think what you're asking us is whether you should use a mortgage product with a higher LTV percentage? So you had been planning to use a 75% LTV mortgage but might want to instead get a 90% one so you can afford more over the asking price? I suspect the answer is that you'd need to do your sums, as those may come with higher rates/fees, and may be harder to qualify for depending on you/the property.

juliushibert

user1977 said:

There isn't really a distinction in terminology between the "deposit" as you're calling it (i.e. the minimum amount of equity which the mortgage product requires you to contribute), and what you're calling the "offer over the valuation". The whole of your equity is just "the deposit".

I think what you're asking us is whether you should use a mortgage product with a higher LTV percentage? So you had been planning to use a 75% LTV mortgage but might want to instead get a 90% one so you can afford more over the asking price? I suspect the answer is that you'd need to do your sums, as those may come with higher rates/fees, and may be harder to qualify for depending on you/the property.

Essentially, I think that's what I'm asking. Id planned to use a 75% LTV mortgage. But in to be able to have a chance in getting an offer accepted I may need to look at a 85 or 90% LTV mortgage. I have a mortgage in principle sorted that says I can borrow up to £310k based upon a deposit of £45k. If I understand correctly, you're saying £310k and £45k are dependent on each other. If I were to get a 90% LTV mortgage product would I need to go back to my broker to discuss this and get a new mortgage in principle? 

user1977

juliushibert said:

user1977 said:

There isn't really a distinction in terminology between the "deposit" as you're calling it (i.e. the minimum amount of equity which the mortgage product requires you to contribute), and what you're calling the "offer over the valuation". The whole of your equity is just "the deposit".

I think what you're asking us is whether you should use a mortgage product with a higher LTV percentage? So you had been planning to use a 75% LTV mortgage but might want to instead get a 90% one so you can afford more over the asking price? I suspect the answer is that you'd need to do your sums, as those may come with higher rates/fees, and may be harder to qualify for depending on you/the property.

If I were to get a 90% LTV mortgage product would I need to go back to my broker to discuss this and get a new mortgage in principle? 

Yes, the lenders' criteria will be different about your affordability for starters, so you'd need to check.

Marvel1

Maybe look at cheaper properties to offer over.

[Deleted User]

It's a nightmare for FTBs at the moment. Prices rising faster than people can save, anywhere with jobs is unaffordable.

You can either hang on and hope prices crash back down down to something you can afford, but who knows if that will happen. Or you can press on, keep making offers, and maybe you will get lucky.

Oh, there is one other option. If you have any elderly relatives try to get in their good books. You might be able to inherit some money or property.

MobileSaver

[Deleted User] said:

It's a nightmare for FTBs at the moment. You can either hang on and hope prices crash back down down to something you can afford, but who knows if that will happen. Or you can press on, keep making offers, and maybe you will get lucky.

Or do what most of us did when we were FTBs and buy a less than perfect property and/or in a less than ideal location.

Even 30 years ago, when I was a FTB, I couldn't buy the house I would have liked in the location I would liked so I had to compromise and buy what I could afford. There will be affordable properties the OP could buy today if they wanted to rather than hanging on in some forlorn hope there'll be a price crash. 

getmore4less

I think an  easiest way to think of this is there are 2 deposits.

There is a deposit(A) for the purchase price
There is a deposit(B) for the mortgage LTV calculation

B < A if you go over the HR valuation (they are the same if you go up to the valuation.

Norman_Castle

rigolith said:

It's a nightmare for FTBs at the moment. Prices rising faster than people can save, anywhere with jobs is unaffordable.

• I'm a first-time buyer buying in Scotland.
• Looking at properties approx £200-300k.
• Deposit of £45K

Average property price in Scotland is currently just under £200k

sheramber

That depends on where you are buying.

https://www.gov.uk/government/statistics/uk-house-price-index-scotland-january-2021/uk-house-price-index-scotland-january-2021

In January 2021, the most expensive area to purchase a property was City of Edinburgh, where the average cost was £280,000. In contrast, the cheapest area to purchase a property was East Ayrshire, where the average cost was £107,000.