Say I put down 50% deposit on a house (in the UK), and the other 50% is provided through a mortgage, what happens if I default? Does the bank walk away with the property and the potential of selling for the full sale price? Or do they have to return the deposit back as a % of the property value?
The reason I ask is that, I have received a survey valuation for a property and it is considerably less then the asking price. The bank is therefore only offering a little bit more than the actual valuation. I've heard they are being cautious to protect the banks, protecting them from the risk of the property losing value.
If they only get returned the outstanding debt amount of the loan, there could be a shortfall. If they get to keep 50% of the deposit on the property, then the deposit already paid down would quite likely make up for the short-fall.
Of course, if prices go up the bank doesn't lose out.