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Anonymous
Anonymous asked in Business & FinanceRenting & Real Estate · 2 months ago

How is your max available mortgage amount calculated?

Does the bank look at the rated market value of the house/land? For example I am about to buy land being sold at public auction in a mortgage sell because the owner can’t pay his debts, so it’s a lot lower than the rated value. If I bought it, would I be able to mortgage it out at the market rated value?

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  • 2 months ago

    Banks typically lend at the lesser of sale price or assessed value. For land the mortgage will be a percent of this. 

    If you owned a house for a few years, you could probably refinance and get a mortgage based on the appraised value. For land, I'm not sure that's even true (though it could be) but even if it is true, the bank still might only lend 50% (or whatever) of the appraised value and the purchase price, even if the purchase was a few years old, might heavily go into the appraisers estimate of value.

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  • 2 months ago

    huh? banks don't lend more than the selling price...unless you do something like a HELOC after

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  • Maxi
    Lv 7
    2 months ago

    If purchasing at auction you need to already have your mortgage agreed and in place........ you can loan up to x3 your salary generally, but you need to go and speak to your bank/mortgage broker well before the auction as 'normally' you have to pay a 10% deposit on winning which you lose if you fail to pay the price within a week...so you need to have your finances in order well before the auction........... and some auctioned properties are cash buyers only as no mortage lender will loan on them

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    • Jo2 months agoReport

      Ok thanks, we don’t really call it that here. Will it also depend on m salary? Someone said I wouldn’t be able to re-sell it until 3 years after the initial auction purchase

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  • 2 months ago

    You can borrow about 3x what you make. Yes, you can mortgage it for it's actual value.

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  • Anonymous
    2 months ago

    Yes.  The lender considers the value of the property, but part of that value is determined by the value of the last time it was purchased.  Thus you buying it below market value will make the market value of the property LESS.  And if you have good credit you can take a mortgage on the property, but the amount of the loan is typically limited to 80% of the value.

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  • Mark
    Lv 6
    2 months ago

    If you buy the land for cash and are looking to build a house on it, you will apply for a New Construction Loan.  The amount will be based on your income and what the value of that type and size of house you want to build.

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  • 2 months ago

    I doubt you'll be able to find a lender that will mortgage vacant land.

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  • Anonymous
    2 months ago

    Appraised value, your credit, your down payment and your income all come nto play.

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  • 2 months ago

    The mortgage based both on the value, and the amount you're paying.

    A mortgage lender won't lend if you're buying a property for much more than they think it's worth. The mortgage you get will be based on the amount you're paying.

    • Jo2 months agoReport

      I’m not getting the mortgage out to buy the land. I already have my own money to buy, so then once I do, if I chose to mortgage out the land, will the bank loan me up to the market value? I don’t see why not if they know they can sell it at that price in the case that I default on my loan repayments

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  • Anonymous
    2 months ago

    They take the most you can possibly afford to pay back and double it

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