How does renegotiating on price affect mortgage offer?

[Bodgejobvendors]

We’re attempting to negotiate after a bad survey. I think/hope our vendor will end up agreeing to take 2%-3.5% off the price previously agreed. I know this will still be above the minimum price we needed the mortgage valuation to come back at.

We had our mortgage offer through before rates went up, so we have a very good five year fix at 1.89%. If we were applying from scratch now we’d get 2.34%.

Does changing the value mean we lose our current rate? From what I can see that would then mean we’d actually end up paying more.

To pay for the repairs, we’d like to keep the mortgage value the same, which only tweaks the LTV by about 1.5%. But we could adjust everything to keep it exactly the same if that’s what’s necessary to keep the good rate.

Does anyone know how it works?

Basically the vendors tell you to foxtrot Oscar and you're looking for a new mortgage and a new property.

We just renegotiated and didn’t need a new mortgage offer so it depends on your lender. Ours is being done as some kind of adjustment (I can’t remember what the solicitor called it), the sale price recorded with the land registry will be the original amount but we will put less in. I’m not sure what the limit is, ours was 2%.

Mortgage valuation came back as less than the offer price, by £5k. The mortgage was adjusted accordingly (LTV) and the interest rate was adjusted upward. This was with a 30% deposit. This was early April 2022.
All done automatically by the bank. They aren’t going to loan, what they fear they may not get back, if they have to repossess the house.

I think this is the same as the scenario you are in?

No different situation. The bank was happy with the value agreed at offered and would have proceeded on a lower value. It’s us who would now cause the reduction.

You’re bringing your own baggage to the table. There are circumstances where vendors do have to renegotiate. Ours have accepted this is happening.

Thanks. I guess I just need to ring the lender on Monday and explore how they’d approach it.

Ah in that case what @Thursday37 said.

Mortgage Adviser here….

Unless the loan to value (amount of mortgage you need vs. value of property) has increased and therefore you no longer meet the criteria of the rate you’ve already reserved, you should be fine - but will need a new mortgage offer to be issued, showing the negotiated purchase price.

For e.g. if your current mortgage offer was for £300k on a property price of £500k, and you now need an offer of £300k on a property price of £495k you should be grand to carry on with the fixed rate you originally reserved (as long as you don’t fall out of the LTV band by doing so.)

Good luck with negotiations and onward purchase!

This hopefully explains

I’d speak to the solicitor first, as ours said that they didn’t need to notify the lender if it was less than a certain amount of variance.

We have a 50% deposit so the LTV isn’t a factor. We are still officially paying the full amount we offered but the solicitor then gives us the negotiated amount back after completion. We’ve had this clause put in to the contract, it’s partly to do with radon and partly another
issue with the survey. The solicitor holds the agreed money and then transfers it back to us. As I say it has a name but can’t remember what they called it. But as everyone had signed the contracts and we exchange soon it was agreed by all parties as the best way forward.