Effect on mortgage when offer reduced

fifilottie

Hi,

FTB here. Purchasing a house, happy to get a mortgage offer as both of us on FT contracts so really pleased. Solicitor has advised we get an electrical check for the house (built in 1930s). Current vendors never checked so likely needs work. Also survey booked. So if it comes back there are issues from survey and checks and we reduce offer will this affect mortgage offer.(do I tell.lender?)..or do I just get to keep the difference and use it towards the improvements. We were so worried about being eligible for a mortgage that I don't want the offer to be affected. Of course we may not reduce offer after surveys etc .but could not find any info on what you can do or what happens  with the so called extra money is offer reduced and accepted. As said, FTB so whole new.ball game for me. Any advice much appreciated!!!

jonnydeppiwish!

Probably best to post this in the mortgage forums - they have plenty of brokers who will provide the best advice 👍 

user1977

You worry about it if and when the time comes! But if it's being reduced (by any significant amount) then no, you can't just lie to the lender about what the price you're actually paying is, you need to tell them. And your solicitor will even if you don't. Whether that changes anything depends on the figures involved, but the lender will use the lower of the actual price and their valuation for the purposes of calculating the LTV percentage.

DullGreyGuy

You'd need to tell the lender the revised purchase price, its up to you if you want to then drop the mortgage amount proportionally to maintain the same LTV or if you want to keep the same level of mortgage and therefore have a higher LTV. Interest rates and acceptability are dependent on LTV but are often done in boundaries so if your LTV goes from 81% to 83% it probably makes no difference but if it goes from 89% to 91% it will make a difference even though both are a two percentage point move.

fifilottie

Thank you for your replies. I have just booked for an electricity check. I know it won't meet current standards as vendor has not had it checked for a decade but hopefully hopefully nothing too major comes up. Would like to avoid rewiring but also don't want to affect the mortgage offer we are so grateful for and ask for a reduction of price if something major is reported. We have a 30 per cent deposit. Would adapting the offer be anything like a reapplication..having to submit documents, waiting apprehensively, hard credit checks(although nothing has changed). I would happily not start messing with the original offer if it does. I am possibly worrying in advance but like to cover all hypothetical scenarios. Many thanks everyone!

eddddy

If it's just a change in price, the lender just needs to be informed so that they can issue a new offer. That might take a week or so.


But you say you have a 30% deposit - does  the mortgage product you're applying for have a max ltv of 70% (i.e. you're hard up against the 70% ltv limit)?

If so, if you reduce your offer, the lender would reduce the amount they'll lend you.

For example, if you reduce your offer by £10k, the lender would reduce the amount they'd lend you by £7k. i.e. They would only lend 70% of the reduced offer price.

newsgroupmonkey_

Just as a FYI, I'm actually surprised that it's ONLY been checked in the last 10 years.

As part of buying a 1930s property, you need to expect to have to do some electric work and the house will have been priced accordingly.

If you want something that needs nothing doing, you need to buy a new build.

I've no issue with people offering less if something unexpected turns up on a survey, but electrics? I'd be expecting that.

Spiderroo

Our survey brought back a long list of issues so we negotiated on price (inc full rewire, new heaters and pipes, new roof, etc). We negotiated on the price and our mortgage was adjusted accordingly. We had an 85% product and it had to be reduced to make sure we stayed within the parameters of that product. It means you only get to keep a small proportion of the discount negotiated so you need to be sure you can actually find the capital for the work elsewhere! 

user1977

newsgroupmonkey_ said:

Just as a FYI, I'm actually surprised that it's ONLY been checked in the last 10 years.

As part of buying a 1930s property, you need to expect to have to do some electric work 

Being a 1930s property doesn't give you that much guidance on how old the electrics are likely to be - they'll almost certainly have been rewired at some point (or several points) since the 30s, unless it's a serious museum piece with round-pin sockets etc.

fifilottie

These comments are really useful, thank you 

Newsgroup monkey..I really appreciate your comment. I am a FTB so all is a learning curve. house is in a great location and we feel lucky to get the price we have. I would much prefer to work out the possible further expenses to do off my own back. Being in fixed term contracts and getting mortgage offer means we are thankful for this and don't want to jeopardize any further questions. We can afford it but proving it all has been a process, we will be paying next to nothing more on what rent we pay and we have never struggled with it.

So three bedrooms semi detached bungalow..how much for a rewire? Want to not disrupt offer and try and do off my own back. That's fine though will need to get a loan to do it. All a bit scary x sometimes I feel I know what I am doing and other times not x

K_S

fifilottie said:

Hi,

FTB here. Purchasing a house, happy to get a mortgage offer as both of us on FT contracts so really pleased. Solicitor has advised we get an electrical check for the house (built in 1930s). Current vendors never checked so likely needs work. Also survey booked. So if it comes back there are issues from survey and checks and we reduce offer will this affect mortgage offer.(do I tell.lender?)..or do I just get to keep the difference and use it towards the improvements. We were so worried about being eligible for a mortgage that I don't want the offer to be affected. Of course we may not reduce offer after surveys etc .but could not find any info on what you can do or what happens  with the so called extra money is offer reduced and accepted. As said, FTB so whole new.ball game for me. Any advice much appreciated!!!

@fifilottie It's quite common to renegotiate the purchase price downwards post-offer. The lender needs to be informed for sure. Depending on the lender, this can be done by the broker or solicitor.

Depending on the initial valuation, LTV (old and new) and loan amount, a new offer may need to be issued but you should still be able to keep the initial product/rate if you're in the same LTV band.