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peter_2008

Lvt, Multiplier And Aip

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Hi, just saw a mortgage advisor today to get an Agreement in Principle (AIP). I was really suprised that I got AIP equivalent to 5x income multiplier. I was like "what happened to that shxt called prudent lending?" Then the advisor told me, because I have a rather large deposite, the amount of money they would lend to me becomes bigger simply because, it will take a +40% price crash for the bank to start losing money, so they ain't bovved (hmmm... brutally honest). In fact, your salary becomes rather less important if you have a big deposite.

The problem is that the amount is about 4 times more than I really want/need to borrow.

Now, I am worried that because I got a rather large number showing on my AIP, would the EAs/Vendors sneekily try to push to that limit?

Would it work to my disadvantage, now that they can see I can borrow a lot of money?

Would the vendors refuse to reduce the price, because they think I should simply mortgage to my eye balls like everyone else?

Would it make negotiation more difficult?

If so should I just pretend that I don't have an AIP? And pretend I am really stretching myself?

Any advice?

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Your concerns are valid. The estate agent will try very hard to sell you properties at, and beyond what your AIP states, plus whatever you are putting down. They are remarkably hard to shift from this position.

When I applied for an AIP, I already had a budget in mind and was not interested in borrowing the maximum on offer. So I just asked for an AIP for the amount I wanted to borrow, and that was that.

In my experience, the estate agents and vendors didn't pay me the least attention without an AIP. Having said that, you don't have to use the lender that provided the AIP, and you can get other more suitable ones from as many other lenders as you like, or ask the first lender to reduce the amount on the AIP. They should be happy to oblige.

Alternatively, state your deposit/mortage ratio to the vendor / estate agent to indicate your actual budget. They don't care what the loan / deposit ratio is, so long as you can lay your nubbies on the money.

Oh, and I would be remiss if I did not remind you that house prices are on the cusp of collapse, you're mad to buy a house rather than gold and beans, etc.

Hi, just saw a mortgage advisor today to get an Agreement in Principle (AIP). I was really suprised that I got AIP equivalent to 5x income multiplier. I was like "what happened to that shxt called prudent lending?" Then the advisor told me, because I have a rather large deposite, the amount of money they would lend to me becomes bigger simply because, it will take a +40% price crash for the bank to start losing money, so they ain't bovved (hmmm... brutally honest). In fact, your salary becomes rather less important if you have a big deposite.

The problem is that the amount is about 4 times more than I really want/need to borrow.

Now, I am worried that because I got a rather large number showing on my AIP, would the EAs/Vendors sneekily try to push to that limit?

Would it work to my disadvantage, now that they can see I can borrow a lot of money?

Would the vendors refuse to reduce the price, because they think I should simply mortgage to my eye balls like everyone else?

Would it make negotiation more difficult?

If so should I just pretend that I don't have an AIP? And pretend I am really stretching myself?

Any advice?

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Your concerns are valid. The estate agent will try very hard to sell you properties at, and beyond what your AIP states, plus whatever you are putting down. They are remarkably hard to shift from this position.

When I applied for an AIP, I already had a budget in mind and was not interested in borrowing the maximum on offer. So I just asked for an AIP for the amount I wanted to borrow, and that was that.

In my experience, the estate agents and vendors didn't pay me the least attention without an AIP. Having said that, you don't have to use the lender that provided the AIP, and you can get other more suitable ones from as many other lenders as you like, or ask the first lender to reduce the amount on the AIP. They should be happy to oblige.

Alternatively, state your deposit/mortage ratio to the vendor / estate agent to indicate your actual budget. They don't care what the loan / deposit ratio is, so long as you can lay your nubbies on the money.

Oh, and I would be remiss if I did not remind you that house prices are on the cusp of collapse, you're mad to buy a house rather than gold and beans, etc.

Thanks for the advice. I think I will get another AIP. Actually, I am not too seriously looking around, so I may well just show them the high value AIP, and then winder them up by absolutely refuse to negotiate.

In my area, some of the properties are back to pre 2002 level. This is important, because in my area that was around when property price went up about 30% in a single year. That was the time when the banks were even lending to dogs.

Repo volume is also going up.

I reckon there will be so many choices, if the EAs and vendors want to play hard ball, they are the one will lose out in the end. I am more than happy to move on, because I got a choice of 200+ properties.

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Silly salary multiples are still alarming common., but seriously it is nothing to worry about. Just tell the agent the upper price limit that you are willing to go to and make it very clear you don't want to go above this.

We borrowed x1.8 our joint salary and never wanted to borrow more, but most banks will still lend us x4-4.5 times our joint income.

We could have borrowed more if we wanted - but that would have meant paying 6% on a 400k loan instead of <4% on a 200k loan- ie our monthly mortgage payment would have been £2,700 vs £980.

Edited by Van

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  • 309 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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