Getting an accurate valuation on your home is crucial for a smooth purchase or remortgage process. This article explains what a mortgage valuation is, how much it costs, and how to avoid common problems. If you have any further questions, contact Butters John Bee through our local branch finder.
What is a mortgage valuation?
A mortgage valuation is a type of survey conducted by a mortgage lender. It assesses whether the property you plan to purchase is worth the agreed price. Sometimes called a valuation survey, it significantly influences whether the lender will offer the mortgage funds you need.
When you apply to remortgage your existing property, the lender will also carry out a mortgage valuation. This is to ensure the property's value matches the amount stated in your application.
While mortgage valuations primarily benefit lenders, they can also inform you if you're paying an appropriate price. Unlike a house valuation conducted for sale purposes, a mortgage valuation serves the lender’s interest and focuses on the property's value for purchase.
What to expect from a mortgage valuation
At what stage is a mortgage valuation done?
A mortgage valuation occurs after you've agreed on a price with the seller and the property is off the market. It happens post-mortgage application but before the lender issues a mortgage offer.
What do mortgage valuers look for?
A surveyor, sometimes without visiting the property, conducts the mortgage valuation. If the lender has ample information about the area, they may skip an in-person visit. When a physical survey is conducted, it’s often based on an exterior assessment.
Surveyors look for non-standard building materials or visible structural issues that might impact the property’s value.
What happens if a mortgage valuation is higher than your offer?
If the valuation is higher than your offer, it means the lender believes the property is worth more than the price you’re paying. This indicates you’ve secured a good deal!
What happens if the valuation is lower than expected?
Typically, lenders agree with the sale price reflecting the property’s value. However, if a surveyor assesses the property as worth less than the agreed price, this is called a ‘down valuation’.
What is a down valuation?
A down valuation occurs when a surveyor deems a property to be worth less than the agreed sale price or proposed remortgage value. This can lead the lender to reconsider and possibly reduce their mortgage offer.
For instance, if you plan to buy a property for £250,000 with a 10% deposit (£25,000), you’d need a mortgage for the remaining 90%. If the surveyor values the property at £200,000, the lender will only offer 90% of that amount, which is £180,000—leaving you £45,000 short.
How can you avoid a down valuation?
Don’t panic if faced with a down valuation. You could:
- Try a different lender with another surveying company.
- Appeal the valuation, though this isn’t common.
Before making an offer, you can also:
- Research the property’s value: Check recent sale prices of similar properties in the area over the last 3-6 months.
- Get an expert opinion: Consult a local estate agent like Butters John Bee, who has experience with similar properties and can provide a well-informed valuation.
- Make a realistic offer: Use your research to propose a realistic offer. Don’t hesitate to offer less than the asking price if similar properties have sold for less.
How much does a mortgage valuation cost?
The cost of a mortgage valuation depends on the property's price, ranging from £150 to £1,500. Some lenders may offer this service for free.
Mortgage valuations vs. House surveys
A mortgage valuation differs from a house survey. A house survey, which comes in various levels of depth, is a service you pay for and can highlight potential issues affecting your purchase or future resale value. Note that even if you pay for a mortgage valuation, you might not see the report or know the surveyor's findings. Consider the level of risk you're willing to take.
There are four main types of surveys, each providing increasing detail:
- Mortgage valuation
- Condition report
- Homebuyer report
- Building survey/Full structural survey
We recommend that buyers at least arrange for a Condition report.
Butters John Bee can help!
We provide you with free, no obligation valuations. Contact your local branch today!
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