Mortgage/Valuation issue

[toshj]

toshj- have you considered anything I wrote/ any of those questions when approaching this 'deal'?

yes yes, excellent post mate was in the process of answering a few of your points, but i realised its pointless as i appear to be continually wrong in everyone elses eyes

the point is, removing my friend and the additional renter out of the scenario, i could buy this place on my own on a capital repayment mortgage. i'm ultimately buying the place with a friend as i've known him for 20 years and he's an excellent bloke - without me he'd never have a chance of getting on the ladder. his family have helped me out in the past and i'm keen on repaying them. but obviously i'm a total douche for doing this

 

[toshj]

Whilst that is very nice of you (To be helping your friend get a foot on the 'property ladder' whilst putting a huge financial millstone around his neck that he is unable actually pay down- ps if he is earning £25,000 in 2 years - £7,000 a year more than now- and is paying £800 a month mortgage -i.e. double what it is now, he IS going to struggle)

that's the thing, its neither his or my idea to buy a place in this manner, but his mum's idea. she wouldn't let him rent as she wanted to a deposit down in his name. i raised this issue last night with him, in that his mum could effectively financially cripple him - however, she's always happy to (financially) support him. given my relationships with the family i duly obliged to go 50:50 on a property with him, as i new that taking the my side of the mortgage (£190,000) is affordable in my eyes.

 

[toshj]

So essentially the thread has come down to, asking advice on a major financial decision where clearly money isn't an issue.


Hmmm.....

it was asking advice on how to get around the banks valuation of the place to make sure we could secure the property - at no point has money come into this from my side, everyone else decided that money came into this. glad i'm being blamed for that too

 

[toshj]

Thats all fine and well. The issue still remains that the property is overpriced, going by the valuation that has been performed by the banks surveyors.

yeah i completely understand, and there's no way we'll be paying our initially accepted offer price, its entirely up to him to decide to lower his expectations or pull out of the sale. he'd then have to bank on a cash buyer, or a different lender valuing it at a higher amount - both are unlikley in this market.

 

[toshj]

I don't want you to take offence, I just want you to take notice. How many people have told you this is a bad idea? Please listen to us, try to re-examine the matter from a fresh perspective. We are simply trying to stop you making a horrible mistake, nothing more than that, honestly.

most people we've spoken to have actually been pretty supportive. spoken to an ifa, an accountant (regarding my own financial situation) and if the bank are happy to lend to us then i thought that must say something. my mate's cousin has 20 years experience within a commercial bank (our mortgage advisor is a family friend), and his mother is one of the most fearsomely intelligent people i know - all of these people seem to think its not a bad idea.

trust me, i've taken into account everything that's been said on this thread and haven't just mindlessly argued my case. i actually thought that property was quite well priced - a 1,400 sq ft is a pretty big flat for zone 1 in central london, and if you were to plonk the property in the area i live now (old street) it would be worth a hell of a lot more than its asking price - a one bed conversion in the building in which i'm renting goes for £450,000.

all in all, i doubt the vendor will want to take a hit of £75,000 on this place, so i imagine this thread will come to a rather boring anticlimax.

 

[toshj]

So any linkage to the actual property ?

lol, not yet i'm afraid. if it falls though or we end up getting it, i'll post some photos. like i said, main selling point for me was the table tennis table and pool table! if my job failed i'd just work my way towards being a top-earning professional table tennis player!

 

[toshj]

No offence but a lot of banks thought over-leveraging people was a good idea back in 2007, and look what happened.

What do these supportive people say when you pose the question about interest rates hitting even a still historically tiny 2%? Also as I said, don't forget mortgage rates are likely to go up anyway as the SLS ends. Have you considered that?

Whilst you say you might not get this one, I think a lot of people here would hate to see you make the same mistake on another similarly priced property that does get you an accepted mortgage.

i completely understand the point you're getting at. most of the people we've consulted are fully aware of:

a) my financial situation
b) the integrety of my mate's mum

its very difficult to describe what type of person she is, but she would never leave her son in the **** and has significant funds to call upon should anything go awry

as mentioned in previous posts, i've taken on board quite a lot and you posts/suggestions certainly seem to be the most constructive. i've already drop a few qutestions through to our mortgage advisor in line with the SLS point and othes. thanks for the advice - really aprpeciated

 

[toshj]

No,

From the first page of the thread



She will not be entering a legally binding agreement (she is obviously not as naive as the OP or his friend).

Also to the OP: What happens when within the next 5 years you or your friend (or both of you) find a partner and want to move in with them???

the place currently has two couples living in there at the moment, and we've both come to the decision that we'd be happy living under similar arrangements - also this would therefore split the payments four ways.

thanks for calling me naive i'd hasten to add itspretty naive to comment on someone's moral grounding without having met them. its the sort of thing that external commentators wouldn't really be able to grasp unfortunately, therefore making both of our stances irrelevant

 

[toshj]

Naive is not necessarily derogatory, it's just that you are obviously inexperienced in the whole buying houses thing, and your friend's mother seems to be much more experienced in it. Don't take it the wrong way. I didn't mean stupid, just inexperienced.

Btw, if she feels so strong on backing up her son it would be good to put her in the mortgage as a guarantor as well, it can only help your friend's credit.

ok cool. i'd be the first to admit that i have little experience within this space, however i know my budget and am not willing to compromise that. taking the entire debt on myself would be within my budget (including rates rises), so that's the point i was trying to get at.

i was under the premise that i would be able to renegotiate at the end of the two year fixed, and that given my credit rating and our combined income we should have been able to do that relatively successfully. obviously people don't agree and that's made me have a think

 

[toshj]

Why don't you just make an offer at the banks valuation price? If you pay more than they value the property you’re always going to be fighting an uphill battle as far as remortgaging is concerned.

yeah, having spoken with my mate and our mortgage advisor, that looks like th plan from now on.

i spoke to the estate agent just now and she indicated that the vendor was very disappointed its been valued at such an amount, as a number of different agents had valued it at a similar amount. she asked whether we had additional funds on top of our deposit to put into the offer so it doesn't fall short of his asking price, and i simply let her know that we wouldn't pay over the valuation. if we managed to get it through at this amount (£475,000) i'd be pretty content, but obviously wary as to issues other posters have highlighted

 

[toshj]

slight update: we had the valuation report sent through. it had been valued as such because:

- its surrounded by both residential and commercial properties

- its above a commercial premises (the 8 units in the warehouse are live/work units, and the bottom floor is an art studio). this will affect future marketability

- it has a flat roof, and that its likely we'll either have to pay for repairs or a new roof at some point

- there are no comparable places around in the area at the same price

the estate agents have somehow found the surveyor's email address and have sent him an unofficial revaluation request (doubt this is a good idea) by providing a couple of others places in the local area that have sold for similar amounts. they're kinda clutching at straws here, as one of the properties is miles away!

should be interesting to see how this unfolds. after speaking with our mortgage advisor he insisted that if things shot up and we were at a 6% level we'd be paying £1,900 per month - and that's if we decided to stay on with our current mortgage provider at the end of the two year fixed. this would work out as the three of us each paying £635 per month, which is again not too bad for London.

as always, please feel free to correct me on anything I've missed