HELP - price reduction after mortgage offer

Jab88

I'm a FTB so a bit clueless when it comes to buying a property. 

We have had an offer accepted on a property and got a mortgage offer which expires end of August this year, the details are as follows:
235,000 deposit
605,000 borrowing
840,000 agreed price
72,0238095 % LTV

The mortgage offer states 'Minimum value of the property required to borrow the illustrated amount: £711,764.71'.

When we initially viewed the property we were told that the roof was completely redone 3 years ago, new windows installed and some other things were updated. A full structural survey highlighted that that these works were of poor standard and will have to be overhauled. The building company hired for those jobs does not exist anymore.

After speaking to the estate agent about these issues, he has spoken to the vendor who is open to reduce the price due to these unforeseen issues. The estate agent believes the seller is not opposed to knock 12k off the agreed price and will confirm this early next week. 

When we received our mortgage offer, we got a good interest rate - in fact, a few weeks later interest rates went up so we were glad to have had ours locked in at the time. 
We are keen on keeping the interest rate that we've locked in as it would be quite a bit higher should we do a new mortgage application now. My question is that should the purchase price be reduced, how would this affect our mortgage offer and the agreed interest rate?
I think there would be two scenarios which may be applicable:

1) keeping the same LTV and therefore reducing our deposit and borrowing:
231,643 deposit
596,357 borrowing
828,000 new agreed price
72,0238095 % LTV

2) keeping our deposit the same but reducing the borrowing amount which would give us a lower LTV:
235,000 deposit
593,000 borrowing
828,000 new agreed price
71,6183575% LTV 

Either scenario works for us but we are just conscious that we would not want a change in interest rate, or could the lender potentially withdraw the offer or likely give us a higher rate as current interest rate is higher now?
Which scenario would be more likely should the interest rate remain the same which we have on our offer?

We haven't spoken to our solicitor yet as the reduction has not been agreed yet.

Any advice would be greatly appreciated. 

MaryNB

There's no difference in interest rate between 72.0238095 % and 71.6183575% %.

Interest rate changes usually happen in increments of multiplies of 5 , e.g, 95 %, 90 %, 85 %, 75 % down to 60 %.

You'd likely have to go to 60 %, maybe 70 % to get a lower interest rate, depends on your lender. 

Lavendyr

You need to talk to your lender. No one can tell you how they will act if you change the contract price. I'd be surprised if they changed the interest rate on the mortgage offer, but you can only ask and find out. This isn't something we can tell you I'm afraid. 

K_S

@jab88 There's nothing to stress about at all, this is a VERY common scenario. Going down from an agreed pp of 840k to 828k while keeping borrowing the same (if that's what you want) at 605k will not make any material difference to the mortgage offer as you're still in the same LTV band and not asking to increase borrowing.

The lender still needs to re-issue the mortgage offer with the updated purchase price and with most lenders it's a matter of 1-5 working days to process the request and issued the updated offer document. Depending on how long it has been since the original offer was issued, and the specific lender process/policy, their system may 're-score' the application but it should make no difference to the outcome.

Once a reduction has been agreed, just drop a note to your broker or get in touch with the lender (if direct) to get this sorted. Good luck!

Jab88

K_S said:

@jab88 There's nothing to stress about at all, this is a VERY common scenario. Going down from an agreed pp of 840k to 828k while keeping borrowing the same (if that's what you want) at 605k will not make any material difference to the mortgage offer as you're still in the same LTV band and not asking to increase borrowing.

The lender still needs to re-issue the mortgage offer with the updated purchase price and with most lenders it's a matter of 1-5 working days to process the request and issued the updated offer document. Depending on how long it has been since the original offer was issued, and the specific lender process/policy, their system may 're-score' the application but it should make no difference to the outcome.

Once a reduction has been agreed, just drop a note to your broker or get in touch with the lender (if direct) to get this sorted. Good luck!

Thank you so much for your response, it's much appreciated! Completely clueless and was worried they were going to change the interest rate we've locked in as it was before the rise but fingers crossed it won't make a difference.  

I'll speak to both our mortgage broker and solicitor about this once the reduction has been agreed with the seller, the solicitor mentioned to us in the beginning that it would take about a week to amend the mortgage offer but wasn't sure whether that would affect the interest rate agreed. 

Thanks again for the advice, fingers crossed all will go well! 

poohbear99

@Jab88 just wondered how you got on with this as we are in exactly the same position. Our lender is Nationwide.

Jab88

poohbear99 said:

@Jab88 just wondered how you got on with this as we are in exactly the same position. Our lender is Nationwide.

Our mortgage offer is from Nationwide as well. Spoke to our solicitors and they said they would arrange once the seller agrees to a reduction and they have it in writing (have not heard from the estate agent on this yet but should do by the end of the week hopefully). 
Solicitors don't foresee any issues with this and seem confident the given interest rate would remain the same. They advised processing time for mortgage offer amendment is usually between 2-5 days. 

I'd speak to your solicitor, they will be happy to sort it out for you as they also act on behalf of the lender. 

RogerBareford

Jab88 said:

poohbear99 said:

@Jab88 just wondered how you got on with this as we are in exactly the same position. Our lender is Nationwide.

Our mortgage offer is from Nationwide as well. Spoke to our solicitors and they said they would arrange once the seller agrees to a reduction and they have it in writing (have not heard from the estate agent on this yet but should do by the end of the week hopefully). 
Solicitors don't foresee any issues with this and seem confident the given interest rate would remain the same. They advised processing time for mortgage offer amendment is usually between 2-5 days. 

I'd speak to your solicitor, they will be happy to sort it out for you as they also act on behalf of the lender. 

Have you actually spoken to Nationwide about this?. When i bought a house last year with a Nationwide mortage and enquired about a potential change in purchase price and a change in the borrowing amount would result in a new application which would then use the latest interest rates at the time. They even said that any admendtments would result in a new full application as that is how they process it.

So probably a good idea to ring Nationwide and confirm this ASAP before going any further.

TheJP

Jab88 said:

poohbear99 said:

@Jab88 just wondered how you got on with this as we are in exactly the same position. Our lender is Nationwide.

Our mortgage offer is from Nationwide as well. Spoke to our solicitors and they said they would arrange once the seller agrees to a reduction and they have it in writing (have not heard from the estate agent on this yet but should do by the end of the week hopefully). 
Solicitors don't foresee any issues with this and seem confident the given interest rate would remain the same. They advised processing time for mortgage offer amendment is usually between 2-5 days. 

I'd speak to your solicitor, they will be happy to sort it out for you as they also act on behalf of the lender. 

Given the increase in the base rate today i would probably say the new offer will have an increased rate of 0.25%.

Its also not the solicitors job to update the lender on this, its the borrower. A new offer will have to be issued.

Jab88

@RogerBareford @TheJP

We've been told that it's unlikely that the rate would change as we are staying within the same LTV bracket. Also not changing product so there is no need for a new application, this simply would be done via an amendment request which takes a few days to go through. We have not spoken to Nationwide directly as we applied via a mortgage broker but both, our mortgage broker, and solicitors have done this numerous times with Nationwide specifically. 

We were told a new application with Nationwide was only needed if there is material change that would result in us having to apply for a new product and/or the LTV bracket changing. 

RogerBareford

Jab88 said:

@RogerBareford @TheJP

We've been told that it's unlikely that the rate would change as we are staying within the same LTV bracket. Also not changing product so there is no need for a new application, this simply would be done via an amendment request which takes a few days to go through. We have not spoken to Nationwide directly as we applied via a mortgage broker but both, our mortgage broker, and solicitors have done this numerous times with Nationwide specifically. 

We were told a new application with Nationwide was only needed if there is material change that would result in us having to apply for a new product and/or the LTV bracket changing. 

If your broker has said that then it will be fine then.

I applied directly so i'm not sure if that made the difference that they wouldn't allow amendments or maybe i was just misinformed by them when enquiring.