Gordon(posted 7956 days ago)If a council tenant approached a lender with a property available for purchase at £53,000 but its open market value was £86,000, the difference between the two, unless I am wrong, can said to be the equity.
However, I hear you say that the lender has the right to take the 'purchase price' of the property or the 'valuation' (its own that is), 'whichever is the lower'.
In actual fact, although I was a private tenant, Britannia's own (low) valuation was £65,000. (The property was banded for Council Tax purposes through the courts at £88,000.) But offered to me for £53,000.
My point is - and I don't think it was expressed in an 'angry' (negative) manner - that Britannia asked me to sign a document postponing any rights before my partner was granted the mortgage. Paragraph three of the document reads 'I will not assert or maintain against the (Britannia Building) Society as mortgagee of the Property any right interest or claim in equity or by way of over-riding interest or whatever.' (Lack of punctuation not mine but signature on the document is.)
This might suggest to all reasonable persons that an equity interest was aknowledged by a Lender, then 'postponed' - then totally ignored. This also aknowledges that the property was worth more than the (mortgage) purchase price (even if you don't). The actual mortgage was £49,875.
[Note. In fact I believe these terms should be written to read 'the current market value of the property - with the equity therein - or the lender's valuation, whichever is the lower'. Does it for Council tenants?]
Since the lender's valuation was £65,000 let's do the sums with that:
Lender's mortgage offer £49,875 divided by £65,000 X 100 = 77%. For any nitpickers, the lender would normally pay for the MIG at level between 75%-90% - and not charge a Higher Percentage Arrangement (HPA) to the borrower. However, the 'errors' mentioned in my initial contact with this site (and now I'm begining to regret it) ensured that additional charges pushed the account over this percentage - across the MIG threshold. (In actual fact it was the HPA fee of £830 that pushed the borrowing into this band and another wrongly charged sum of £195, the latter since refunded.)In other words... the risk assessment was manipulated.
These complaints have also been listed individually over many months to avoid the confusion you speak of. But I would have thought that undervaluation was something many on this site have experienced. I merely suggest (without having been subject to the the pain many have gone through by repossession) that it is this same undervaluation (through postponement)that I found curious. Could there be a link?