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Reduction in sale price - do mortgage company need to know?

(14 Posts)
AnonymousBird Tue 05-Jan-16 18:17:57

We've agreed a (very small) reduction in our sale price.

The house I am buying is worth considerably less than the one I am selling and as a result my mortgage is decreasing, not increasing. The sale price reduction is very small in relation to any of the figures in question here (for arguments sake, it's a £5k drop on an almost £1m house; new mortgage in the region of £150k).

Am I obliged to tell my mortgage company?

Bearbehind Tue 05-Jan-16 18:40:50

Yes. Even if you don't your solicitor will have to.

Spickle Tue 05-Jan-16 22:55:13

Yes, ditto what Bearbehind said. Your solicitors acts, not only for you, but also the mortgage lender and they will be obliged to disclose this to them. The contract will also need to changed to show the new price.

FishWithABicycle Tue 05-Jan-16 23:01:59

Yes. This happened with our first time buy and I was horrified to discover the price reduction was jeopardising the whole mortgage as we were no longer meeting the minimum loan-to-value ratio. Be prepared for your loan amount to be reduced proportionally.

HappyAsASandboy Wed 06-Jan-16 05:56:40

I read the OP the other way ....

The mortgage company for your new (cheaper) house don't need to know if you sell your current (expensive) house for less than you originally market it. Why would they care?

If the change in sale value does anything (however small) to the loan-to-value ratio (LTV) I.e. You're talking about a reduction in price on the property you are buying with a mortgage, then yes, they need to know.

AnonymousBird Wed 06-Jan-16 07:22:51

Thanks. My solicitor knows about it already and she is of course, acting for them.

LTV on new property is something like 20% so I don't think it will jeopardise the mortgage offer but understand that they need to know.

Cheers.

AnonymousBird Wed 06-Jan-16 07:24:29

Purchase price unaffected, but I am receiving £5k less on sale so my "pot" left over is reduced but I don't need that £5k to buy the new house.

Fuckitfay Wed 06-Jan-16 07:32:20

I don't think it matters. As you are downsizing if your mortgage loan amount and your deposit cash down amount for the new house remain the same, as does the price of the new house then nothing has changed that will affect your mortgage offer. Except perhaps that you'll have £5k less in the bank afterwards

Bearbehind Wed 06-Jan-16 07:41:22

If it doesn't affect your onward purchase then there's no need to tell that mortgage provider.

The current mortgage provider will need to be informed for the purposes on completing the sale but it won't affect them as it only reduces your equity.

TotalConfucius Wed 06-Jan-16 08:33:01

Not if the £5k is not being laid down onto the new house.
The solicitor will keep what needed to pay off the old mortgage (if there is one) and lay down the deposit on the new house, then transfer the balance to you. You're taking a hit on your profit from the transaction.

TotalConfucius Wed 06-Jan-16 08:34:12

Well, the solicitor will also deduct his fees for both transactions of course.

PixieGio Wed 06-Jan-16 21:32:22

Wow we are going through a similar thing. We only got a £750 reduction but our case has now been referred back to the underwriters as apparently we are no longer meeting minimum LTV? Can someone explain this further? It's baffled me.

Bearbehind Thu 07-Jan-16 09:22:40

pixie it might be better to start your own thread but basically, if you are now getting £750 less for the house you are selling and have no other way of making up that shortfall on your onward purchase the the percentage value of what you are borrowing against what the house is worth has changed.

If that percentage change takes you into a different rate category, these are generally in 5 and 10 increments at the higher end of the scale, then you have to have a different mortgage product and therefore your case will be referred.

It does sound a lot of fuss for £750- can you not raise that much to top up the deposit?

AnonymousBird Thu 07-Jan-16 10:50:20

Solicitor has advised no need to tell them as it has no bearing on our ability to purchase. It just means we have £5k less left over after it all goes through (the joys of down sizing for ones means SMALLER debt and MORE cash - never been in that position before!)

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