does a bnk not give out a mortgage is property is over priced

Jupiterx

Hello,

My friend wants to purchase a property in Basingstoke. He has been offered a property to buy but is not sure if he is getting a decent deal on the property.

He has been told by his mortgage advisor that if the property was priced too high (property is worth less), the bank would not give a mortgage. is this correct?

Hemel_2

Yes, that is correct.

ruggedtoast

Not really. A survey might flag up a property that was very over priced for the area but the idea that the bank makes any kind of assessment as to the intrinsic value of the property and will protect you from paying too much is a fallacy.

Most of the recent rises in prices have been down to banks lending larger and larger amounts of money for the same types of properties. Their main concern is whether you'll be able to pay the mortgage back. The more money they lend you the more money they make.

Deductions on the mortgage offered are much more likely to be because faults are found by the surveyor than because they decide the place is overpriced.

LittleVoice

If the price is £100K and the valuation says £80K, if the mortgage is only £60K, do you think the bank will be worried?





(rhetorical question)

Bf109

Banks lend you money using the property as collaterall.

The bank therefore needs to know that the property is worth as least as much as the loan otherwise the bank has no collaterall and is exposed to risk.

Therefore the bank sends round a surveyor to value the property. If the valuation report says the property is not worth the value of the loan then the bank will not lend you the money - but may lend you a lesser amount - but you may need to put even more money down to maintain the LTV.......

yoshihirouk

From somebody who works for a prime mortgage lender right now:

"We lend on the purchase price or the valuation, whichever is lower".

Jupiterx

thanks for the replies, i will pass the information on to my friend.

Jazzypap

Our recent survey highlighted numerous issues, some of major concern but the mortgage lender applied no retentions, which initially perplexed us.
We then realised that this was probably because we were only borrowing £105k of a £170k mortgage. Had we borrowed the full £170k, I'm sure they would imposed a retention.

AndrewSmith

Lenders decide on the mortgage amount being offered by a number of guiding factors. Some are:IncomeCredit HistoryAgeEmployment StatusProperty Type & ValueIgnoring the others lets look at the property value and type. If you are buying a property on which you have secured an offer of £100,000 and you are putting a deposit of £15,000 then your mortgage product will reflect both the valuation and the amount of loan being taken in relation to it. This is called 'loan to value' and is usually expressed as a percentage. In the example above the 'loan to value' would be 85%. The product, rate and terms would be based on this loan to value percentage.If the lender then says the property is only worth £90,000 they re-assess their lending based on that valuation. Remember a lender bases it's lending on the purchase price or valuation whichever is the lesser. So to keep the same product as above they woul only lend you 85% of £90,000, thus £76,500, or tell you that they only lend to a maximum on any property of 90% but you have to take a higher priced product.If you are borrowing up to the maximum loan to value allowed by the lender on any product then this is when it will leave a shortfall in your borrowing.Hope this helpsAndrew

TTMCMschine

ruggedtoast wrote: »

Not really. A survey might flag up a property that was very over priced for the area but the idea that the bank makes any kind of assessment as to the intrinsic value of the property and will protect you from paying too much is a fallacy.

Most of the recent rises in prices have been down to banks lending larger and larger amounts of money for the same types of properties. Their main concern is whether you'll be able to pay the mortgage back. The more money they lend you the more money they make.

Deductions on the mortgage offered are much more likely to be because faults are found by the surveyor than because they decide the place is overpriced.

I think you'll find the banks are being a tad more careful now. Yes they have lent money left, right and centre - but that isn't the case now they've had their fingers burnt, and prices weren't falling in value back then - now they are. Why do you think they've removed so many mortgage products from the market? AndrewS and pals sound like they know what they're talking about.