Loan Security Valuation

Question 1

What is VPGA 2?

Answer 1

valuation practise guidance application-Valuation of interests for secured lending.

Talks about-
Conflict of interest within 24 months
taking instructions
use market value basis
assumptions and special assumptions
reporting and disclosures

Question 2

what is UK VPGA 10

Answer 2

valuation for commercial secured lending purposes in the uk.

includes- client is key
limit liability
reporting suitability for loan security

Question 3

What sort of advice would you provide the client in a loan security valuation?

Answer 3

suitability as security
anything likely to affect value
the amount, size etc
market commentary
any specific requirements from the lender for example flood risk etc

Question 4

What makes good comparable evidence?

Answer 4

similar constrcution, location, use, tenants and recent date of transaction

Question 5

Whats a typical loan to value ratio

Answer 5

typically 60% to 70% commercial

Question 6

Whats typical interest rate on commercial mortgage

Answer 6

6% to 8%

Question 7

how much should a commercial loan deposit be?

Answer 7

approximatley 30% at least

Question 8

what is bank of england base rate

Answer 8

0.75%

Question 9

Explain how a commercial mortgage works

Answer 9

lenders will normally fund up to 75% of purchase costs with a terms up to 30 year. typically they will secure against a first charge and affordability is based on the profitability of business.

Question 10

How does property development finance work

Answer 10

usually in the form of a short term loan thats used for new developement. lenders will advance up to 70% of GDV and terms will last 24 months.

Question 11

How does portfolio finance work

Answer 11

A long term business loan thats offered to investors with multiple investment properties. Based on rental income

Question 12

What is bridging finance?

Answer 12

A short term finance solution offers a loan to buy somewhere before selling property

Question 13

what is Auction finance

Answer 13

designed for funding in advance of an auction

Question 14

what is a mortgage

Answer 14

A loan using property for security for the lender.

1. charged interest on money borrowed
2. higher the mortgage rate the more money borrows pay in interest
3. the quicker the borrower pays back, the less interest there is

mostly look for 30% deposit at least ( the more the better)

Question 15

What parts of the red book apply to Loan security valuations?

Answer 15

VPS 1 to 5

UK VPGA 2 , 8 and 10

Question 16

How does an interest only mortgage work?

Answer 16

at the end of the mortgage term the amount borrowed is paid off using savings or investments.

Question 17

What is UK VPGA 11

Answer 17

valuation for residential mortgage purposes