How much will the bank lend me?

Question

I want to buy a property and let it out. To do so, I'll need a buy to let mortgage in the UK.

Let's say the property has been officially valued at £100,000. The bank says they will lend me 75% of the value of the property, so £75,000.

However, because this property is in demand, I think I'll have to pay £110,000 for it. I only have to pay this much because others will as well. I would argue that, because it's in demand, it is worth that amount, so I am not losing out by paying a little more. I would just be paying what it is actually worth.

But to do so, I still need the bank to lend me 75% of this value, £82,500. Will the bank lend me this, because that's 75% of the sale price or will they say "we'll lend you 75% of what a surveyor thinks, £75,000, and you need to come up with the other 25k plus any additional amount you have to pay to secure it"? i.e. 35k.

Answer 1

The order here is backwards. You make an offer, have it accepted by the seller - and then you get the lender to value the property.

If their valuation is greater than or equal to your offer price, then great! If not, you have a number of options, including:

• trying to find a larger deposit;
• trying to persuade the lender (specifically, the surveyor who conducted the survey) to reconsider their valuation;
• seeing if the seller will drop their price;
• if all else fails: withdrawing your offer.

Ultimately, the lender will tell you what they are willing to lend you - as an amount of money, not a percentage.

Answer 2

They'll lend you 75% of whatever their valuation is, usually based on a fairly perfunctory survey.

There's no real concept of an "official valuation" prior to you trying to get a mortgage for your specific purchase. In your scenario you would hope that a surveyor or lender would recognise that the market is quite "hot" and that you are actually paying a fair price, but there are no guarantees.