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Any shortfall on the value you would need to make up with cash.
Worked example:
- you bid £380k with £80k cash on hand
- Lender values at £350k
- £30k of your deposit would go towards bridging the value gap (380- 350 = 30)
- You would be left with £50k deposit on a £350k valuation, i.e. £50k deposit, £300k loan, LTV of 14%.
You could probably find a mortgage at this LTV, but you would obviously have a higher interest rate.
I have done you a sensitivity table:
- you bid £380k with £80k cash on hand
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If its a physical survey being done by a chartered surveyor they will have what is known as a 5pc bracket. That means they can sign it off with a 5pc margin for error on their part, without the risk of being sued for negligence. 30k over at 350 does sound a little punchy to me but stuff in East London goes under offer for over asking quite often. One I saw the other day was a house at 950 and it sold for 1025000.
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princeperch
@Jaaamie
We had offer of 380k accepted on a house listed for 350k (mad market, not in London) and are about to have the lender valuation done for the mortgage. We have 80k deposit (21% ltv). 300k loan.
If the lender comes back and says it's worth significantly under how fucked are we? We could probably scrape together another 10k worth of deposit and doubt seller would budge much, if at all, on agreed price.
Does lender primarily care about their stake being recoverable (300k)? Would I only need to worry if there was risk of them undervaluing to below 300k (v low risk)?