Error in mortgage offer

[rrrrrreatt]

My partner and I are buying our first house together. We offered £288k with the understanding we’d borrow £244k (LTV of 85%).

The bank undervalued the property at £280k but still offered us a mortgage of £244k. The broker emailed saying this did not affect our product range and the lender was still happy to lend us the full amount we’d asked for.

They also sent us the illustration, as a PDF with offer in the title, which says the loan granted is £244k on a property valued at £280k, and a letter saying our mortgage had been accepted. Importantly the figure in the illustration places us at 87% LTV after the undervaluation (with the last 8k being made up by us) but would have been 85% of our original offer.

Unfortunately our survey flagged the property needs a rewire and new roof. We negotiated to £275k, asked the broker to inform the lender and asked for advice on if we could keep the same loan amount or adjust it to reflect the £5k reduction below their valuation,

The broker has come back and said we have an 85% LTV deal so this can’t be done. We pushed back on this saying we already had an 87% LTV offer and they checked with the lender who confirmed it was an 85% maximum LTV deal.

We pointed out the paperwork doesn’t reflect this but the mortgage broker has brushed it off the lender’s paperwork being unclear. I don’t think that’s true - surely the offer should have told us how much we were actually being lent instead of a different figure? Is this normal when getting a mortgage?

We think maybe there was an error on the offer and they put in the old figure for the £288k instead of an adjusted figure based on the £280k valuation. is that even possible?

Have we made a really obvious mistake because we don’t get mortgages or is the paperwork wrong? If it is the paperwork should our broker have spotted it?

Just run it by your conveyancing solicitor

To be honest the solicitor has to inform the mortgage company of the actual offer price.
If the surveyor opinion says 280k but you actually pay 275 then that's considered a better estimate of the value of the house. As the value of a house is literally what a willing buyer is prepared to pay for it.
Unless you submit evidence that you are paying below market value eg buying from a family member, then they would work out the 85% as of the actual purchase price.
So whatever happens before, the broker can say what they like but the solicitor will only allow you to exchange contracts if the mortgage offer is valid.

What is the product on the illustration? There should be a line in the top section that says "NatWest B1407 85% FTB 24 month £999 fee" or something like that.

We checked all our documents but it doesn’t tell us anywhere what the product is or the LTV.

We spoke to our broker again this morning and he thought the paperwork had an error in it. When he spoke to our lender they said it was a ‘discretionary tolerance’ where we’d been undervalued but they were still prepared to lend as if we hadn’t. It’s not in any of the literature, that we received or online, and our broker said they’ve never seen anything like this before.

The upshot is nearly all of the discount we negotiated off will be absorbed by the adjustment for the new price which means our budget for the required work is nearly halved but in the very long run I think we save as our mortgage is less. Not ideal but I guess the mystery is solved.

So will they now lend you £233,750 max or do they want to switch you to a 90% LTV rate?

It sounds like they were willing to accept a £36k deposit on £280k but not a £31k deposit on £175k as that's 89% LTV. If you can make it work with them, I would. Any new deal now would be a higher rate as they're rising about twice a week.