Does a lower than expected valuation mean re-assessing affordability?

pretendgolfer

I've applied for a Direct Line mortgage, and so far everything seems to be going ok - although slowly as apparently their underwriters have a huge backlog and i won't be assessed until end of the week. Affordability had no issues, and some credit cards will be paid off with my half of the equity (the other half going to my ex girlfriend). I can see that I've been credit searched on application when I was on the phone and he said that was absolutley fine, and a follow up unrecorded enquiry was made on friday by the underwriters I guess.

If the valuation comes back lower than the estimated figure I gave, Direct Line said that this just means I can only borrow 95% LTV of the valuation - which is still fine by me (this would also reflect in less equity to my ex - i know i need to seek an estate agents valuation to agree a true value and won't use the mortgage valuation for this purpose).

However, I wondered if anyone knew if this means that they ask you to re-qualify what you will do with the (lower amount of) capital from the equity being released, as it probably means that I have less left over to pay off the credit cards I originally stated. (The total amount though would still cover them but it is not all mine). And if they re-assess affodability based on this, or if by this stage as they have already established affordability it is not an issue.

I know I am probably being a bit paranoid and will find out in due course, but i've been unable to find any clues on this, and would like to know up front if I can finally get this all sorted out and finished once and for all!

I know myself that I can afford it as I've been paying all of the mortgage for the last 5 months along with everything else, and I'll have even less credit card payments afterwards too (yay) - but I know this doesn't always mean anything to the mortgage companies.

Even if it does come back lower, I expect there would still be enough equity to clear all credit card debt - but i have already told them at application time i would use half of the equity to buy out my ex - so this will be in the notes.

If anyone has any knowledge of how these things normally progress, I'd be grateful of any info in the mean time to me getting the update phone call

UK007BullDog

Not really sure what you are asking hence no reply to your post.

Sit still and wait. Let the lender do his thing first of all.

One thing I would like to add is that the lenders valuation is the one you should use, not the estate agents. Because if the lender states xx is the value then that is what the value is. If the EA states it is yy which is a few grand or more it does not matter. In the end it is what someone would pay for your property. If my lender tells me the property I look to buy is worth £150K but the buyer wants £160K I would ask for the reduction or I walk away.

dwsjarcmcd

I agree with the above, why on earth would anyone rely on an Estate Agents valuation over a qualified surveyor?

pretendgolfer

Thanks for the replies - I wrote this in a bit of a hurry at work and should have proof read it!

I guess I was assuming that the valuer may value it higher than the estate agent but thinking about it in todays climate it is unlikely! Previously I have found they value it at whatever you tell them you think it is worth, but I'm sure now they are more cautious. Also I think I may have been lead into thinking i needed to get 3 estate agents valuations and take an average, by a financial advisor before christmas and also by my ex girlfriend (presume someone told her this).

I guess the point I did not make very clear, and my real question, was around the affordability asessment process. As an example, lets say I get an offer subject to valuation to borrow 190k against a valuation of 200k (95% LTV) and they are happy I can afford this.

You would assume that if the valuation came back lower, at 190k, then they would simply say you can only borrow 180500 at the same LTV - which is what I am hoping. And that they leave it at that.

My question was: if the affordability calculations for the 190k involve paying off credit card X and Y with the equity released, because I am now only borrowing 180k do lenders typically ask to re-verify if you will still pay of X and Y? On the basis that in thoery there could only enough to pay of card X now because there is less 'cash'.

I'm pretty sure the total equity would still be more than the debt to clear anyway, but some of that would have to go on paying the ex off - however that amount would be lower now too.

I guess I am being a little paranoid, and impatient as there is still no progress on my application (it hasn't been looked at yet but the 8 working days are up tomorrow so should hopefully hear something soon!!).

I suppose when you have everything crossed for something to finally work out in the end, you always try to look for the worst that can happen!

Hope that makes it a bit clearer - thanks for the replies and any further input/insight anyone has.

If I hear anything and find the answer to my own question one way or another, I'll post the answer too.

jill2002

The lenders valuation is normally lower because it is the price that they think they would get if they have to sell the place quickly - in the case of repossession.

dwsjarcmcd

jill2002 wrote: »

The lenders valuation is normally lower because it is the price that they think they would get if they have to sell the place quickly - in the case of repossession.

Not the case. Most valuations will give more than one figure. A market value i.e. what it may sell force and a forced sale i.e the figure you refer to in your post. They will never just give a forced sale figure unless in very specific circumstances