What LTV to apply for when expecting a downvalue

CardiffCrank

I've received conflicting advice from two different brokers and I wonder if anyone here can shed some light. We have had our offer accepted, well over asking. We expect the lender to value at something close to the asking price and, in this environment, don't see why the vendor would renegotiate if that happens.

If the bank likes our price, we can go ahead on an 80% LTV. If they don't, we probably need a 90% LTV.

Which should we apply for? We've been told "Apply for 80%, get the good rate, and if it doesn't work out they'll just switch you to 90%" and we've been told "If you apply for 80% and then need to change to 90%, they'll want to go through everything again more carefully and it will hold you up - just apply for 90% and if things go well then tell them later you can actually go to 80% after all."

Any thoughts?

Thrugelmir

If you offer well above asking then it's not a down value, if the banks surveyor disagrees. Lender requires adequate security for the monies being advanced. Their money you're spending not your own. If the vendor isn't willing to renegotiate then look for another property. Why would you want to overpay anyway in a climate of rising interest rates and other economic pressures. Playing games achieves nothing. The property would have marketed at a higher price if it were worth more initially. EA's for all the criticism they receive know the local market. 

CardiffCrank

There is no other property. We've made several offers, all rejected without the opportunity to go to best and final, all of them over asking. We've steadily increased how far over asking we'll offer until we got accepted. Supply and demand! Estate agents here set asking prices below the market price because (1) it gets us in the door and potential buyers expect to have to pay over asking and (2) they want to align with the bank's valuation because then we've no room to renegotiate. Why would the seller renegotiate when, as you say, it's not really a down-value?

I'm overpaying because there is a shortage of available houses in my area at the right price point. The alternative is not buying. If I don't buy a house I will bear the cost of additional rent while I wait and the cost of moving, as my current landlord wants to sell, and the cost of increased rent, as he hasn't increased it in six years, and the stress of not knowing where I'm moving to. Seems worth it to me, though I may be wrong.

Back to the question, do you have any idea whether I would be better off applying for 80% optimistically and then retreating to 90%, or should I pessimistically go for 90% and then shift to 80%? Not a game, just looking for some honest advice since professionals are disagreeing.

SuseOrm

I would apply at 90% and then if it goes well go dadada here’s an extra 10% deposit I’m just looking at this logically if I was to lend my kids money for example that would be the best scenario in my mind.  Psychologically I think it would be better to be giving the more money not less

K_S

@cardiffcrank To start off I just want to say that I've never applied for a mortgage for a client while factoring in a significant down valuation

In the scenario outlined in your post - if you go up an LTV band after a downval, the lender will usually need to rerun the "credit-score" (this is an internal lender calculation and nothing to do with your Experian /Clearsscore/Credit karma score) at the higher LTV before reissuing an offer. If your case was borderline to start with, a move to higher LTV could potentially tip it over from an accept into a decline. Just to be clear this does not require them to do the whole underwriting again.

I can't advise a specific course of action but hopefully the above will help inform your decision.

CardiffCrank

Thanks @K_S - so they'll just take all the information they've already gathered and run it through a slightly different formula to see if they get a different answer? Sounds straightforward.

I don't think we're borderline (certainly neither broker gave that impression) so I think we'll go ahead and apply for an 80% product. I think that we might well be able to scrabble together the funds needed in any case.

silvermountains

How did you get on @CardiffCrank?

IAMIAM

I would apply for 80% LTV. Lenders and surveyors are literally sooo different its untrue. One says one value, one disagrees, one agrees with you, next one says something else. Go with what you want and deal with consequences when they arise. 

CardiffCrank

Hi @silvermountains - got the application in over the Easter weekend, took a bit longer than I expected to get everything together for the broker! I've applied at 80% and now it's the waiting game.

getmore4less

What about where the best lender at 80% is not the best lender at 90%
some lenders have 85% break points

What sort of  income multiple/affordability is there on the borrowing.

CardiffCrank

Yeah, those first two points passed through my head for sure, but in the end I gave up and just applied on the 80%!!

As another user said above, if you then get kicked into the next band because of the valuation, you'd want to be confident about your income level, and we are fine on that front.