Purchase price change - so does interest rate?

KCfinale

Hi! I would love some advice for my situation .I am a first time buyer and have recently had a survey done on a house i am purchasing. This has thrown up some issues and we have agreed to 10k off the purchase price. My questions are...

- If i reduce the mortgage, i have been told this can potentially affect the interest rate (my offer was 4.9%) and be increased to around 6% now that rates have gone up further. I am waiting to hear back from the broker and bank if this will be the case
- I have heard that you can keep the mortgage the same and instead take out the additional cash leftover? However my broker says this is not an option

Any advice on how to handle this/ similar situations would be great!

housebuyer143

If reducing the property value changes your LTV to a different, normally higher bracket then you will lose the rate. So 85%, goes up to 87% etc. 

You cannot be given the £10k and leave the property value the same as you have negotiated a lower property value so the mortgage company would deem the purchase price to be lower and they will not lend more than the agreed purchase price.

grumbler

housebuyer143 said:

If reducing the property value changes your LTV to a different, normally higher bracket then you will lose the rate. So 85%, goes up to 87% etc. 

With the same deposit LTV can get only lower, not higher.

I'm no expert, but I don't understand why this can result in higher interest rate and why the broker says that a small extra cash for the buyer "is not an option".

amnblog

If the purchase price is down and the mortgage request drops by the equivalent level, your product is still valid.

Example: Price was £100,000 mortgage borrowing £85,000 (85%)

Now price £10,000 less at £90,000 borrowing £76,500 (85%)

85% loan to value product still fits

If you wanted to borrow the same £85,000 on lower £90,000 purchase price, loan to value is now 95% which does not work for 85% loan to value product.