Mortgage for a house that's non-standard construction

JennyP

A friend is selling a house that is of non-standard construction. The buyers' mortgage valuation has come through significantly lower than the offer they made. Their deposit is 10%.

My friend has been told that if the buyer's had a bigger deposit - say 15 or 20% - a mortgage company might be less reluctant to lend, so might give a higher valuation.

I'm not sure that's true. Does anyone please actually know if this is the case?

Isthisforreal99

They won't give a higher valuation but a higher deposit means they lend the same but the buyer can pay more. But anyone paying more than valuation is nuts.

user1977

Possibly a misunderstanding - the solution is more that the buyer can just make up the balance themselves even if the first lender is only prepared to lend 90% of their valuation.

peteuk

If the valuation has come back lower then I'm surprised the buyer hasn't changed their offer.

Jemma01

It sounds like the buyer shared the valuation in the hope your friend would be sensible and reduce the asking price. It's unlikely they can afford more than they planned for, and your friend is likely to face similar issues in the future.

JennyP

Thanks for your replies. An estate agent has told my friend that if they get a buyer with a higher deposit, the banks will value the property higher as they'll be more willing to lend. That just doesn't sound right to me.

It isn't my decision but I think they'd be better taking the offer, rather than waiting in case someone else comes along and is willing to pay more.

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/comment/82138134#Comment_82138134

But with a higher deposit they dont need to lend more, which is the point.

A sale is agreed at £300,000, the buyer is hoping for a £30,000 deposit and £270,000 /90% mortgage. The lender values the property at £270,000 and as 90% if the cap for borrowing on this product they will only lend £243,000. If they increase their deposit to £57,000 then the deal can go ahead because the lender is still at 90% of its valuation and the seller is still getting £300,000

Obviously other solutions are to reduce the sales price or find someone either a larger deposit or using a lender who values the property more highly.

Depending on what the construction is, how common it is in the area and if the valuer is local or doing a remote valuation from the other end of the country and call impact the valuations. There are some pockets of odd construction that are sort out in the local market that would make someone not aware of the local market more twitchy than a local chap. Obviously if yours is a truely one off building then that is always going to be difficult to value and bank valuers tend to be slightly more cautious

Jemma01

https://forums.moneysavingexpert.com/discussion/comment/82138134#Comment_82138134

all the bank cares about is, if the property is sold, they can recoup their full amount, so any loses are carried on by the home owner rather than them. If the home owner can't because they have little deposit, then that's a risk on the bank.

I had a high deposit, and HSBC didn't care that my initial property was unusual construction, they only did a desktop valuation, didn't send anyone to the property, I think the approval was few days, application submitted Thursday 3pm, approval was Monday at 12pm 🤔 (mind you I'm self employed, which often takes a lot longer)

kimwp

https://forums.moneysavingexpert.com/discussion/comment/82138134#Comment_82138134

Doesn't sound right to me either. A bank's willingness to lend in relation to the house is reflected in whether or not they agree to mortgage the house.

In relation to the risk of the money being paid back:

• The buyers will be required to have insurance to protect against damage to the house ie the asset that the bank will take ownership of if they stop getting their money back
• They will not make a mortgage offer if they think the buyers are too high a risk
• They will offer lower interest rates if they think the buyer is a lower risk
• They will offer lower rates if the mortgage makes up a smaller proportion of the house value ie the deposit is larger - because there's less risk of them losing money if they have to claim the property and sell it low to sell it quickly.

They won't change what they think a house is worth because the buyer has a different amount to deposit, these things are unrelated.

Herzlos

https://forums.moneysavingexpert.com/discussion/comment/82138134#Comment_82138134

I think it's a bit backwards.

How much the house is valued at is fixed, and how much they'll lend is fixed.

A bigger deposit means that the buyer can pay more to the seller, by borrowing less from the bank. So they'd in essence have the same deposit for the mortgage, plus cash to cover the difference between mortgage valuation and sale price.

sherlock228

if an EA said that then it stands to reason it is wrong as all they want to do is say whatever will sell the property and get their commission.
what did the mortgage broker actually say?