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Buy to let question...

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  • Buy to let question...

    Hi all!
    I need your advice on this...Here's an example of the situation
    A £100,000 market value house. If i got this house for £80,000
    In a 75% LTV (Buy to let) mortgage, does it mean i need to get 25% deposit of the £100,000 or £80,000???
    Or is it calculated from the valuation of the bank?

    The figures shown above are only examples. Thank you.

  • #2
    So far as I understand, the LTV is based on sales value (ie, what you would buy it for, not "general" value, ie the £80k).


    • #3
      I agree. If you enter into a trsnaction with a stranger at arms length and persuade him to sell to you for £80K the lender is going to consider that that is all the property is really worth and will only lend 75% of that amount.

      The only exception I can think of is that some lenders might accept a rare situation where e.g. a family member was prepared to make a "gift" of the difference in value - sometimes then they will accept that the property really is worth more and base their lending on the market value rather than the amount you are actually paying, but this is unusual and much less likely to be the case with BTL than owner occupation.
      RICHARD WEBSTERwww.rwco.co.uk
      As a conveyancing solicitor I want to be helpful (England/Wales only) but can't accept liability for this.


      • #4
        Mortgage Lenders

        Richard is entriely correct here, lenders will work of purchase price or valuation, whichever is the lower.
        Some lenders will accept the difference if from a Direct Family member - this is known as a gifted deposit, and will require extra legal work, eg the vendor will be required to sign a deed of gift indemnity.
        Worldwide Financial Planning is a specialist independent provider of Large mortgages.


        • #5
          Just wondered if you had any luck with this deal going through, it would be nice to see how people are getting on?


          • #6
            A way around this is to buy the property with a short term bridging loan (£80k) and then arrange an immediate remortgage (at 75% LTV) on the full value (£100k). You can then pay back the initial bridging loan and have effectively only put £5k into the purchase.

            I've never done it but I think that how all the "no money down" BMV guys do it.
            Last edited by bassboy76; 16-12-2008, 11:44 AM.


            • #7
              Concerning the last post, solicitors have a duty to report to lenders about transactions concerning the property taking place over recent months. Any sensible lender would then be bound to ask about the accuracy of the £100K valuation.

              I think one or two BTL lenders were prepared to accept this situation to get market share, but I wonder whether they are still quite so keen!

              As a conveyancing solicitor I believe the information given in the message to be useful but I accept no liability except to fee-paying clients
              RICHARD WEBSTERwww.rwco.co.uk
              As a conveyancing solicitor I want to be helpful (England/Wales only) but can't accept liability for this.


              • #8
                using the difference between pp and valuation

                It is very possible to utilise the difference between purchase price and open market value, but you need to use a broker and solicitors that know what they are doing.

                I don't know how to let you contact me but if you can manage it I can probably help.



                • #9
                  Could you not post the advice here in the forum for everybody? I'd love to know the answer to this just out of interest as many others would too I'm sure.

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