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  1. #1

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    Default Home Report Valuation - Scotland

    Hi,
    If I buy a house for £85k that has a home report valuation of £100k. Does the lender view this as having £15k equity in the property + deposit amount?
    Thank you,

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    I doubt it.

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    Prof Cunning @ Oxford Uni

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    No.


    The lender looks at how much you want to borrow and weighs the risk up against how much the house is worth.
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    Quote Originally Posted by WTFH View Post
    No.


    The lender looks at how much you want to borrow and weighs the risk up against how much the house is worth.
    Yes, and the survey says £100k based on the home report. Are you saying that the house is considered worth what is paid for it and not the actual valuation?

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    Quote Originally Posted by hydraulicwave View Post
    Hi,
    If I buy a house for £85k that has a home report valuation of £100k. Does the lender view this as having £15k equity in the property + deposit amount?
    Thank you,
    Just offer an additional 20K. The lender might spin his wife into the deal.

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    No. It's the amount you're putting down that matters, not your imaginary profit.

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    Quote Originally Posted by jamesbrown View Post


    No. It's the amount you're putting down that matters, not your imaginary profit.
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    Quote Originally Posted by jamesbrown View Post


    No. It's the amount you're putting down that matters, not your imaginary profit.
    Hi, thanks for your reply. It's not really imaginary though, is it. I could buy it for the above mentioned price, then re-mortgage a couple of months down the line and release the equity for a deposit on another. So if I needed, say a £15k deposit on another in the future, I could just use the equity that you call imaginary. This assumes the valuation stays the same though.

  9. #9

    Prof Cunning @ Oxford Uni

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    You could buy it for whatever you want.
    You could remortgage it.
    There are lots of things you could do.


    Firstly you get a mortgage.
    So if you buy a house for £85k and you put down a deposit of £15k, then you are getting a mortgage for £70k.
    £70k is what the mortgage company are lending you.
    £15k is what you are putting in (don't forget to leave enough money for solicitors fees, removals etc)


    For the next 10,15,20,25,30 years (delete as appropriate) you will be paying off the mortgage - either just the interest, in which case you will need to find £70k at the end of it, or you'll be paying capital + interest, in which case at the end of it you will own the property.




    Now we come to "equity". That's a concept used by people to pretend they have money. Equity only becomes real when you actually perform a transaction. If your house is worth £100k then you could remortgage it to "release" £15k. Of course, that is dependent on a mortgage company lending you the extra money and you being happy to make the extra repayments.


    Let's crunch a few numbers...
    £70k mortgage at 2.5% over 25 years = £314 per month, total repayable £94,210
    you remortgage to "release" £15k of equity, making your mortgage £85k
    £85k mortgage at 2.5% over 25 years = £381 per month, total repayable £114,397


    So, your £15k of "equity" costs you £67 per month, or over £20k for the lifetime of the mortgage.
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    Prof Cunning @ Oxford Uni

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    Your accountant/mortgage adviser should have explained all this to you.
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