Lender error - mortgage offer for too much money

Spiderroo

Does anyone have experience of a mortgage offer that gives you too much money for your LTV deal? 

My partner and I offered on a property and applied for an 85% LTV mortgage based on this offer. The bank downvalued it by £8k but told our broker it was 'within the product range' so we could retain our original offer amount. The mortgage offer came through with the original offer amount, which we accepted, two months ago now. Importantly, this offer gives us a new LTV of 87% based on the bank's valuation. 

The house is from the 1930s so we obviously had a survey and this has uncovered a lot of additional work needed. We made a revised offer and got £13k off the original offer, taking our property price to £5k below the bank's valuation. When we asked our broker to revise our mortgage offer he told us we had an 85% product and I pointed out our offer was for 87%. The broker, and the lender, both brushed this off saying it was an 85% product and interest rate. My partner said we just didn't understand mortgages (only our second one) but I was sure something was wrong though so wouldn't let it go.

I did a lot of research and got my partner to help me model the different scenarios (LTV of 85% vs 87% - property price of our original offer, the new offer and the bank's valuation) which shows changing to an 85% product now means that the £13k we've negotiated off nets us...£2k. If we'd negotiated to the bank's valuation which is £5k more we wouldn't have reviewed our offer and we'd be £8k better off (as we were topping up by £8k). I know they could have spotted it before we completed but if they hadn't! £6k when you're doing up a house is a good chunk of money. 

We've gone back to the broker this morning who's reviewed the documents and said there is an error. Apparently they've never seen this before but the bank has put the wrong figures on our binding offer. He's going to go back to them and try to negotiate a deal where we retain the same interest rate but for our new purchase price. I'm not convinced the bank will do this but I would like some level of compensation; our budget for the house renovation was based on the offer they gave us and we're the ones who will be out of pocket. 

Has anyone had this happen to them? What can we expect the outcome to be? Is it really that rare? I can find loads on Google about lower offers, incorrect addresses, etc but nothing about banks trying to give you too much money for the deal you're on. 

I've also asked if they won't give us the deal for our revised offer, could we shift our offer to the bank's valuation and give our seller £5k more or will they pull the offer knowing the survey turned up work? Do we have to share our survey with them? It sounds crazy to pay £5k too much for a house but it leaves us £6k better off in the immediate term. 

K_S

@spiderroo Which lender is it and did you get a revised mortgage offer when you knocked off 13k off the agreed purchase price?

With many lenders (not all), the revised offer should have -
- new purchase price

- bank valuation / valuation assumed / something to that effect

- maximum LTV and amount which syncs with the product

I'll be honest, the scenario outlined has never happened to me either though I am not surprised if something like this happens due to an error/bug on the lender systems when an amendment is put through.

Spiderroo

K_S said:

@spiderroo Which lender is it and did you get a revised mortgage offer when you knocked off 13k off the agreed purchase price?

With many lenders (not all), the revised offer should have -
- new purchase price

- bank valuation / valuation assumed / something to that effect

- maximum LTV and amount which syncs with the product

I'll be honest, the scenario outlined has never happened to me either though I am not surprised if something like this happens due to an error/bug on the lender systems when an amendment is put through.

The lender is HSBC and the issue has only come to light when we approached our broker for a revised mortgage offer based on the reduced price. It's our original mortgage offer that's incorrect but we based our revised offer on this, we assumed (probably our first mistake!) that we'd be able to retain the same LTV and interest as we're only asking to reduce our lending. 

We haven't yet got our revised mortgage offer, part of me thinks holding on to the one we currently have may be the best solution but I'm worried they'll pull it now they know there's an error in the amount granted.

Spiderroo

The plot thickens - the bank has said this is a discretionary tolerance after the property was undervalued. Our broker has never seen it before and I can't find anything about it online but apparently they will tolerate undervaluing and lend the same amount up to a certain point? 

K_S

Spiderroo said:

The plot thickens - the bank has said this is a discretionary tolerance after the property was undervalued. Our broker has never seen it before and I can't find anything about it online but apparently they will tolerate undervaluing and lend the same amount up to a certain point? 

@spiderroo Sounds plausible and a good feature. I'll admit that I haven't heard of it either.

Spiderroo

K_S said:

Spiderroo said:

The plot thickens - the bank has said this is a discretionary tolerance after the property was undervalued. Our broker has never seen it before and I can't find anything about it online but apparently they will tolerate undervaluing and lend the same amount up to a certain point? 

@spiderroo Sounds plausible and a good feature. I'll admit that I haven't heard of it either.

It does sound really good, I just wish they’d told us before we did all our calculations unaware of it 😂 apparently when you have a desktop valuation the person conducting it can use their discretion to allow you to keep the same amount of mortgage if the undervaluation is 3% or less, where they see fit. 

justwhat

Spiderroo said:

K_S said:

Spiderroo said:

The plot thickens - the bank has said this is a discretionary tolerance after the property was undervalued. Our broker has never seen it before and I can't find anything about it online but apparently they will tolerate undervaluing and lend the same amount up to a certain point? 

@spiderroo Sounds plausible and a good feature. I'll admit that I haven't heard of it either.

It does sound really good, I just wish they’d told us before we did all our calculations unaware of it 😂 apparently when you have a desktop valuation the person conducting it can use their discretion to allow you to keep the same amount of mortgage if the undervaluation is 3% or less, where they see fit. 

This happens   allot as offers are often re-negotiated during missive/ before exchange. Under  a certain amount it is just ignored by the buying solicitor in Scotland provided it does not effect the transaction in a excessive negative manner,(well that what we were told lol)