Right to buy discount + LISA - very low LTV

I have a question about LISA and right to buy mortgages. I am not sure what options will be available to me and whether I will lose out on my LISA bonus.


I have 20k (plus interest) saved in my LISA. Initially I wanted to buy a dream home but my circumstances changed and now my only option is to buy the council house I am living in, valued about 100k (might be 80k-120k). I am eligible to 40% discount.


Quick maths if lenders take discount as deposit then I have 60k and need 40k to be funded, a 40% LTV. I know most banks only offer 50%+ LTV and a few offer 40% but what it my house is actually vallued around 80k it would be like 35% LTV.


If another lender does not take discount as deposit would they value my house at purchase price (say 60k) and my deposit of 20k would be ~65-70% LTV so that would be ok but do lenders do so?


Are there any lenders for, say, 10-20% LTV I know there are specialists but would they lend for right to buy and would they lend for such a low valued property? I am still about 2 years away from buying so discount will go up and I can continue my LISA contributions as long as I do not end up losing out on it. The reason I am not in a position to buy now is that I still have outstanding debt (at no interest balance transfer deals so I am still better off paying into LISA in the meantime).


I appreciate any advice

Comments

  • ACG
    ACG Posts: 23,621
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    The 50%-60% LTV banding is the maximum LTV to secure that rate. 

    If your LTV is 1% or 60%, you could be eligible for the same deal. If it is 60.1% you would be eligible for a different deal. 

    I assume you can use the LISA towards right to buy, its not something I have had to check but cant see it being a problem. 

    The biggest issue might be the size of the mortgage. Some lenders have a minimum loan of £25k, which if the valuation came back at £80k, you might be a touch below - I suppose you could reduce your deposit or go with a different lender. 

    Speak to a broker, but I think you will be fine. 
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • J1638
    J1638 Posts: 10
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    ACG said:

    The biggest issue might be the size of the mortgage. Some lenders have a minimum loan of £25k, which if the valuation came back at £80k, you might be a touch below - I suppose you could reduce your deposit or go with a different lender. 

    Speak to a broker, but I think you will be fine. 
    How can I reduce my deposit if I have already paid into LISA and have 40% RTB discount, that would mean withdrawing from LISA with penalty or saving for retirement which I do not want
  • ACG
    ACG Posts: 23,621
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    If the mortgage drops below £25k, you are reducing your pool of lenders. Not massively and even if it results in higher rates, on £25k it probably wont be the end of the world. 

    This only becomes an issue is the property is valued at the lower end. 


    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • J1638
    J1638 Posts: 10
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    I have just called octagon or something like that the only lender i found to offer low LTV and they have a minimum mortgage of 100k so I don’t think there would be any lenders available to me if I continue paying into my LISA?
  • ACG
    ACG Posts: 23,621
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    Speak to a broker. I think you would be looking at normal/near normal rates. 
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • J1638
    J1638 Posts: 10
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    Maybe now I would, but as I said, I am not buying yet and I am anxious what happens if I accrue another 10-15k to my LISA and at the same time my discount increases to 42-43%, I would certainly not be looking at normal rates (50%+ LTV) as I may have 35k in LISA and (assuming 100k value) 43k discount that’s 78k deposit and 22k mortgage needed. Basically I need to know when to stop paying into my LISA so it doesn’t backfire. Hope I made my question clear?
  • J1638 said:
    Maybe now I would, but as I said, I am not buying yet and I am anxious what happens if I accrue another 10-15k to my LISA and at the same time my discount increases to 42-43%, I would certainly not be looking at normal rates (50%+ LTV) as I may have 35k in LISA and (assuming 100k value) 43k discount that’s 78k deposit and 22k mortgage needed. Basically I need to know when to stop paying into my LISA so it doesn’t backfire. Hope I made my question clear?
    You don't understand, all lenders will lend to someone with 10% LTV assuming that you meet the minimum loan requirement. The products say 60% but that's 60 and under. You don't need a specialist product. 

    If you have too much in your Lisa and you want to borrow less than say 25k you will make it more difficult to find a lender to lend to you. 

    No one can tell you when to stop paying in because they're too many variables - property price, loan amount needed, discount etc. Potentially you just buy the house outright the way it's going? No mortgage needed? 
  • J1638
    J1638 Posts: 10
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    Can’t buy outright with LISA and I think can’t buy outright with rent to buy neither but I may be wrong. Thanks for clarifying. As long as I borrow £25k+ should be fine thanks everyone
  • ACG
    ACG Posts: 23,621
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    Even below £25k should be possible. All I am saying is that you might find a few less options. 
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
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