mortgage - equity

[saxowebby]

right to those who may have a bit of knowledge, i am currently renting a house from a bloke i know its worth £120,000 he has said if i want i can have it for £105,000 so the £15,000 would be classed as my deposit, am i right in thinking the mortgage company doent check your deposit they only give you % on what the value of the house is worth depending on the % mortgage.

so would this be ok applying for a mortgage and them giving me the £105,000 because the house is worth £120,000.


:y:

[Mr_X]

No.....

[potatopete]

No.

You need to hand over a percentage of the selling price, not the value.

[Yates]

what about a 100% mortgage? how do they work? or have i just made that up?!

[potatopete]

what about a 100% mortgage? how do they work? or have i just made that up?!

Used to be able to get them, but dont think many if any banks offer these at the mo.

[Penn]

If he's selling for 105,000 you'd need to have 10% of that in cash for the deposit which equals a 90% mortgage.

Some 95% mortgages exist but the interest rates will shaft you in the arse.

[Yates]

dont you have any savings at all?

[vtectransplant]

There are a couple of 100% mortgages about at the mo, but you have to get your parents/relative/friend to agree to signing an agreement that uses their property as a guarantee.

No money exchanges hands in effect for the deposit, but you get bummed as said on the rates.

When I was looking into it, it was about 2.5% more than a 10% deposit mortgage.

[Heliosphan]

Mortgage lending criteria has tightened across the board but there was a time when banks would readily accept various types of vendor assisted deposit without any contribution from the buyer whatsoever.

However, things have changed and as already said, it's unlikely. Banks get twitchy over anything that doesn't fit the norm. Even if a valuation did back up the numbers, most banks will want a contribution from you as it shows that you can manage your finances effectively.

If you do want to persue it, seek out an independent adviser and let them do the leg-work for you. Just don't build up your hopes or expect a decent rate if you are successful.

[Matty16v]

I think its been covered in here already, if your buying the house at £105,000 then you would need approximately a 10% deposit of the £105,000. The bigger the deposit the better chance of being accepted.

When applying for a mortgage, the banks take into account your income and use an income multiplier for your maximum borrowings. If you earn £10,000 a year then your max borrowing would be £50,000 so you would need a £55,000 deposit.

The income multiplier is 4-5x your salary. If its a joint mortgage application, your income multiplier is 3x both parties salary.

If you need any more information then feel free to inbox me.

Edit: you cannot use borrowed money to borrow money. So you couldn't take out a £10,000 loan and use that.

[Yates]

I think its been covered in here already, if your buying the house at £105,000 then you would need approximately a 10% deposit of the £105,000. The bigger the deposit the better chance of being accepted.

When applying for a mortgage, the banks take into account your income and use an income multiplier for your maximum borrowings. If you earn £10,000 a year then your max borrowing would be £50,000 so you would need a £55,000 deposit.

The income multiplier is 4-5x your salary. If its a joint mortgage application, your income multiplier is 3x both parties salary.

If you need any more information then feel free to inbox me.

Edit: you cannot use borrowed money to borrow money. So you couldn't take out a £10,000 loan and use that.


its not set at x5 your salary, due to the financial climate, some places turned me down for a mortgage, only needed a 90k one, plus the fact i have a 22 year contract so it wasnt down to job stability

[Jonny52002]

The bank will want a deposit of X% (typically 10% but there is a 5% mortgage out there) of your agreed purchase price.

If hes saying he'll let you have it at £105k instead of £120k and you can use the £15k as a deposit, you would have to agree a sale price of £120k and arrange a mortgage with the bank at £120k and he would have to give you the £15k to use as a deposit seperate to the sale.

[Matty16v]

its not set at x5 your salary, due to the financial climate, some places turned me down for a mortgage, only needed a 90k one, plus the fact i have a 22 year contract so it wasnt down to job stability

it is ;) I did say 4 - 5x. They need to calculate your maximum borrowing.

Just to add: Depends on age and other monthly loan repayments. If you are under 30 with no loans then potentially qualify for 5 times salary

[Yates]

it is ;) I did say 4 - 5x. They need to calculate your maximum borrowing.

Just to add: Depends on age and other monthly loan repayments. If you are under 30 with no loans then potentially qualify for 5 times salary

its not, im under 30 with no debt, never had any debt either, never missed a payment on anything, infact my financial adviser said it was the first time in 2 years someone had come back with the top rating. also 90k is below 4 times my wage, so its not always the case

[Matty16v]

its not, im under 30 with no debt, never had any debt either, never missed a payment on anything, infact my financial adviser said it was the first time in 2 years someone had come back with the top rating. also 90k is below 4 times my wage, so its not always the case

How do they calculate your maximum borrowing then?

[MuZiZZle]

How do they calculate your maximum borrowing then?

with dice!

[Matty16v]

with dice!

● It is certain
● It is decidedly so
● Without a doubt
● Yes – definitely
● You may rely on it
● As I see it, yes
● Most likely
● Outlook good
● Signs point to yes
● Yes
● Reply hazy, try again
● Ask again later
● Better not tell you now
● Cannot predict now
● Concentrate and ask again
● Don't count on it
● My reply is no
● My sources say no
● Outlook not so good
● Very doubtful

[MuZiZZle]

● It is certain
● It is decidedly so
● Without a doubt
● Yes – definitely
● You may rely on it
● As I see it, yes
● Most likely
● Outlook good
● Signs point to yes
● Yes
● Reply hazy, try again
● Ask again later
● Better not tell you now
● Cannot predict now
● Concentrate and ask again
● Don't count on it
● My reply is no
● My sources say no
● Outlook not so good
● Very doubtful

Magic 8 ball FTW!

[craig180]

The simple and correct answer is yes.

Mortgage companies operate on LTV, which is Loan to Value.

Lenders will often offer 85% LTV to in theory if the survey/valuations come in at 120k, the mortgage lender will offer you a mortgage of up to 102k (85% of the value), subject to your circumstances and ability to repay the loan.

Therefore, regardless of any deposit you may or may not pay, as long as you cover the 3k difference, you in theory have equity in your house that the lender can reign back in should you default on your mortgage and end up being reposessed.

[Yates]

How do they calculate your maximum borrowing then?

i dont know, but when you say its 4 or 5 times, im saying its not always the case, i can actually prove this and know first hand of this hence commenting, and hence some places turning me down for a 90k mortgage which is a considerable amount below 4 times

[Matty16v]

i dont know, but when you say its 4 or 5 times, im saying its not always the case, i can actually prove this and know first hand of this hence commenting, and hence some places turning me down for a 90k mortgage which is a considerable amount below 4 times

Oh, don't get me wrong. There are definitely lots of other factors that can affect the decision.

I don't mean it to sound like that's the only thing they look at. I was just explaining to the OP as I would assume this is his first mortgage.

[Yates]

Oh, don't get me wrong. There are definitely lots of other factors that can affect the decision.

I don't mean it to sound like that's the only thing they look at. I was just explaining to the OP as I would assume this is his first mortgage.

and i was saying that its not always x4-5 of someone's salary, it was also my first mortgage

[Matty16v]

and i was saying that its not always x4-5 of someone's salary, it was also my first mortgage

First time lending will always be more difficult. It's probably because you was a first time borrowe that it was declined in the first instance, regardless of credentials.

[Jonny52002]

First time lending will always be more difficult. It's probably because you was a first time borrowe that it was declined in the first instance, regardless of credentials.

You would have thought banks would have been glad of the extra business that first time lenders bring. Me and missus were 1st time lenders getting a mortgage 3 years ago and we had no difficulties, I havn't even got the best credit history and was in a job which is probably in the worst bracket for lending (construction/design).

[saxowebby]

dont you have any savings at all?

did have but got married and had a baby and savings went onto those 2 things aswell as furnishing the house we are renting.


The simple and correct answer is yes.

Mortgage companies operate on LTV, which is Loan to Value.

Lenders will often offer 85% LTV to in theory if the survey/valuations come in at 120k, the mortgage lender will offer you a mortgage of up to 102k (85% of the value), subject to your circumstances and ability to repay the loan.

Therefore, regardless of any deposit you may or may not pay, as long as you cover the 3k difference, you in theory have equity in your house that the lender can reign back in should you default on your mortgage and end up being reposessed.

thats exactly what i thought it was, i talk to an advisor :y:

[Heliosphan]

The simple and correct answer is yes.

Mortgage companies operate on LTV, which is Loan to Value.

Lenders will often offer 85% LTV to in theory if the survey/valuations come in at 120k, the mortgage lender will offer you a mortgage of up to 102k (85% of the value), subject to your circumstances and ability to repay the loan.

Therefore, regardless of any deposit you may or may not pay, as long as you cover the 3k difference, you in theory have equity in your house that the lender can reign back in should you default on your mortgage and end up being reposessed.

That's the theory.

In practice most banks will still want a deposit from him despite the apparent equity, partly because the bank will want to cover itself against the possibility of a dodgy or inaccurate valuation.

Definitely speak to an independent, there may be some lenders out there willing to look at it. There won't be many though, if any at all.

[Matty16v]

That's the theory.

In practice most banks will still want a deposit from him despite the apparent equity, partly because the bank will want to cover itself against the possibility of a dodgy or inaccurate valuation.

Definitely speak to an independent, there may be some lenders out there willing to look at it. There won't be many though, if any at all.

The bank will value the property, not the person selling it :y:

[craig180]

That's the theory.

In practice most banks will still want a deposit from him despite the apparent equity, partly because the bank will want to cover itself against the possibility of a dodgy or inaccurate valuation.

Definitely speak to an independent, there may be some lenders out there willing to look at it. There won't be many though, if any at all.

Spot on. Thought I'd mentioned in my post about offering a nominal cash deposit as well. This, as you said is almost a guarantor

[Heliosphan]

The bank will value the property, not the person selling it :y:

Lol. Obviously.

Banks usually instruct a third party, they don't usually have their own team of surveyors. They have an authorised panel that they use but none of that guarantees an accurate valuation.

[jay-vtr]

The amount you can borrow is NOT based on your income anymore so to speak.

It's based on affordability. They look at how much you can afford to pay back each month after your outgoings.

They dont decide the amount you can borrow on 4-5x your income anymore, this is what caused a lot of people to get reposessed and was a stupid way of calculating how much you could borrow as it didnt take into account your outgoings etc.

Best of luck! I dont see why someone would sell you a house worth 120k for 105k... seems a bit odd to say the least, I wouldnt give away 15k of the value of my property without good reason.

Is the building structually sound? Had it surveyed? Is the lease due to run out? Has the vender heard of something that will dramatically decrease the value of the property in the not so distant future?

[Mr_X]

They would only led me 4.5 times my salary.

I'm sure if you buy it for 105k the bank will deem the market value to be 105k as that's what you have paid.