Valuation query

Candy0107

Hi All,

Hopefully, someone will be able to help with a really basic question as I can't find a straight answer online.  We are first-time buyers, and apparently, hubby looks to me to understand the process.

A flat we offered on was on the market for £180,000.  Offer accepted for £176,000.  We have a mortgage agreed for £158,400 (90% LTV).

The next stage is the valuation from the mortgage Co.  This makes me a bit nervous for some reason.

A Friend said to me that as long as the Valuer thinks it is worth more than the mortgage requested (£158,400) we should be OK.  

Do you agree with my friend?

Thanks
Candy x

GDB2222

Your friend is wrong. For the loan to be 90% LTV, the value needs to £176k. The lender may allow a higher LTV, but that is not certain and the interest rate is likely to be higher. 

eddddy

Just to add to what GDB2222 said...

If the mortgage valuer down values the property to, say, £172k - and you want to stick with a 90% LTV mortgage product...

... the most they will lend you is 90% of £172k = £154,800.


So your options would be:

• Find an extra chunk of money from your savings to make up the difference
• Reduce your offer for the property
• Change from a 90% LTV mortgage to a 95% LTV mortgage (if you are eligible. And the rate of interest might be higher)

Candy0107

Hi both,

Thanks for your replies (I love plain speaking/things spelt out).

Fingers crossed they value the property at what we offered.

Candy x

ReadySteadyPop

Candy0107 said:

Hi both,

Thanks for your replies (I love plain speaking/things spelt out).

Fingers crossed they value the property at what we offered.

Candy x

If they don`t, think carefully about dipping into savings to "make up the difference",  as many people who are presumably not FTB struggling with higher borrowing costs seem to often advise. Unless it is an exceptional property that you feel you must buy for whatever reason the best route after a "down-valuation" (really just a realistic take on the market) is to reduce your offer, unless they have a LOT of interest they will have to consider this.

Candy0107

Thanks for the advice. Ready Steady Pop - hopefully the valuation and survey happen soonish so we can react to/deal with certainties rather than 'what ifs'.

ReadySteadyPop

Candy0107 said:

Thanks for the advice. Ready Steady Pop - hopefully the valuation and survey happen soonish so we can react to/deal with certainties rather than 'what ifs'.

Exactly, you should treat asking prices and EA comments as just "noise" in my opinion.

kinger101

ReadySteadyPop said:

Candy0107 said:

Hi both,

Thanks for your replies (I love plain speaking/things spelt out).

Fingers crossed they value the property at what we offered.

Candy x

If they don`t, think carefully about dipping into savings to "make up the difference",  as many people who are presumably not FTB struggling with higher borrowing costs seem to often advise. Unless it is an exceptional property that you feel you must buy for whatever reason the best route after a "down-valuation" (really just a realistic take on the market) is to reduce your offer, unless they have a LOT of interest they will have to consider this.

Lowering the offer is certainly the first thing one should do, but if the vendor stands firm (or can only meet you in the middle) and the shortfall is small, it can make a lot of sense increase deposit.

Nobody wants to pay more than a house id worth, but not having to start looking again, avoid paying rent for longer, and potentially having the same scenario all over again is of some value in itself.

The EA is your friend here.  Although they work for the vendor, they really don't want to market the property again and will do all they can to reach a mutually agreeable position.

ReadySteadyPop

kinger101 said:

ReadySteadyPop said:

Candy0107 said:

Hi both,

Thanks for your replies (I love plain speaking/things spelt out).

Fingers crossed they value the property at what we offered.

Candy x

If they don`t, think carefully about dipping into savings to "make up the difference",  as many people who are presumably not FTB struggling with higher borrowing costs seem to often advise. Unless it is an exceptional property that you feel you must buy for whatever reason the best route after a "down-valuation" (really just a realistic take on the market) is to reduce your offer, unless they have a LOT of interest they will have to consider this.

Lowering the offer is certainly the first thing one should do, but if the vendor stands firm (or can only meet you in the middle) and the shortfall is small, it can make a lot of sense increase deposit.

Nobody wants to pay more than a house id worth, but not having to start looking again, avoid paying rent for longer, and potentially having the same scenario all over again is of some value in itself.

The EA is your friend here.  Although they work for the vendor, they really don't want to market the property again and will do all they can to reach a mutually agreeable position.

It all depends on how overpriced the house was to begin with, say someone was paying cheap rent or staying with family why would they want to borrow more than they have to at uncertain mortgage rates? The less debt they start with (and the more they keep their savings pot intact) the better off they will be in the long run, there are plenty of similar sized similarly located houses hitting the market every day for them to view at their leisure.

Herzlos

ReadySteadyPop said:

Candy0107 said:

Hi both,

Thanks for your replies (I love plain speaking/things spelt out).

Fingers crossed they value the property at what we offered.

Candy x

If they don`t, think carefully about dipping into savings to "make up the difference",  as many people who are presumably not FTB struggling with higher borrowing costs seem to often advise. Unless it is an exceptional property that you feel you must buy for whatever reason the best route after a "down-valuation" (really just a realistic take on the market) is to reduce your offer, unless they have a LOT of interest they will have to consider this.

It's worth noting here that ReadySteadyPop has a vested interest in trying to give the impression house prices are going down, so may not be giving entirely impartial advice.

Whilst the part about not overextending is sound, there's nothing wrong with dipping into savings to either get the house or bring the LTV down a bit. You may find that you're near a boundary so putting in a smallish amount of extra money will get you a better rate. For example we put in another £1000 cash to bring us under 80% LTV and that saved us 0.2% APR which equated to about £40/month in repayments.

I wouldn't reduce your offer after a down valuation unless it's significant, impacts your affordability and you're not too bothered about getting the house or not. You don't really want to miss out on a house you like over a couple of £k, because it'll be meaningless in a few years time.  That said, you don't want to pay well over the odds and have to live on beans on toast for the next couple of years.