90% Mortgage: Of Value of House or Purchase price?

D

Dante Hall

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Is the percentage mortgage the bank will give you, in relation to the purchase price of the property or the real value of the property?

For example, if the house I'm buying has been valued by a bank appointed valuer at €300k, but for whatever reason I'm buying it for €200k, will the bank still only issue 90% of the purchase price only? Or would they consider lending the full purchase price of €200k considering LTV has been established at 67%.
 
Dante Hall said:
Is the percentage mortgage the bank will give you, in relation to the purchase price of the property or the real value of the property?
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Surely the value of the property is whatever you paid for it? How would you 'prove' that it was worth more than what you paid?
 
Yeah of course it makes sense that the purchase price is the value of the property, but there may be the odd exception. In a case where someone has to sell and sell quickly, they may be willing to accept a lower price than identical properties have recently sold for in the same estate for example. If a bank appointed valuer was to confirm that by valuing the house at considerably more than the purchase price, then the evidence is that the house is being puchased below it's real value.

It is a hypothetical situation, and I realise you're correct in your comment, but I just wondered whether anyone had any direct experience to the contrary.
 
Paddy I disagree, it's the value the % is based on, not the purchase price, albeit that these would be the same for most sales, but not, for example if you build a house, we borrowed 100% of the build cost but have a LTV mtg 60-80 %

DanteHall, I would say, however, that the difficulty you will have is convincing the bank that the value is 300k when you're paying 200k for it?
 
The value normally reflects the purchase price. Price agreed first ... valuation follows. The bank will still only give the % based on what is finally paid. So if there's a discount .... bank will reduce too.

It happened in my case: price agreed, bank covered their percentage, price reduced (prior to contracts being signed) and bank accordingly reduced their mortgage amount.

I agree that mortgage is based on valuation .... but when the final price is paid (if lower), bank will only cover the reduced amount. If the final price is higher than the initial valuation, purchaser will be left to cover the additional cost.
 
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