Valuing your home for mortgage or re-mortgage purposes
What is a Mortgage Valuation?
A mortgage valuation is a survey conducted by a lender to ensure that the property you intend to purchase is worth the amount you are borrowing. Also known as a valuation survey, this process is crucial for the lender to determine if they are willing to provide the necessary funds.
Lenders also perform mortgage valuations when you apply to remortgage your existing property. This helps verify that the property’s current value aligns with what you have stated in your application.
Although primarily for the lender’s benefit, a mortgage valuation can also confirm whether you are paying a fair price for the property. Unlike a typical house valuation aimed at sellers, this is conducted in the lender’s interest for the property being purchased.
What can you expect from a Mortgage Valuation?
When is a Mortgage Valuation Conducted?
A mortgage valuation occurs after you have agreed on a price with the seller and the property is off the market. It follows your mortgage application but precedes the lender's mortgage offer.
What Do Mortgage Valuers Look For?
Surveyors may conduct mortgage valuations remotely if the lender is familiar with the area. However, if an in-person visit is required, the surveyor typically evaluates the property’s exterior. They assess for non-standard building materials and visible structural issues that could affect the property’s value.
What if the Valuation Exceeds Your Offer?
If the valuation is higher than your offer, it indicates you’re getting a good deal, as the lender believes the property is worth more than the purchase price.
What if the Valuation is Lower Than Expected?
Occasionally, a surveyor may determine that the property’s value is less than the agreed sale price. This situation is known as a ‘down valuation’.
Understanding Down Valuations
A down valuation occurs when a surveyor concludes that a property is worth less than the agreed sale price or proposed remortgage value. This can lead to the lender revising their mortgage offer.
For instance, if you plan to buy a property for £250,000 with a 10% deposit, you would need a mortgage for the remaining £225,000. If the surveyor values the property at £200,000, the lender will only offer 90% of this value (£180,000), leaving you £45,000 short.
Avoiding a Down Valuation
If faced with a down valuation, don’t panic. Here are steps to potentially avoid this issue:
1. Research the Property’s Value
Investigate recent sale prices of similar properties in the area over the last 3-6 months.
2. Get an Expert Opinion
Engage a local estate agent like Haybrook to value your home. Our experience with similar properties and market insights can provide a realistic price suggestion.
3. Make a Realistic Offer
Base your offer on thorough research. Don’t hesitate to offer below the asking price if comparable properties have sold for less.
Cost of Mortgage Valuations
The cost of a mortgage valuation depends on the property's price. Some lenders might offer this service for free as part of their mortgage package.
Mortgage Valuations vs. House Surveys
A mortgage valuation is not the same as a house survey. While a mortgage valuation benefits the lender, a house survey provides detailed insights into potential issues with the property that could affect its purchase or future resale value. There are four main types of surveys, each offering varying levels of detail:
- Mortgage Valuation – a basic survey which confirms the property’s value for the lender.
- Condition Report - provides an overview of the property's condition, highlighting urgent issues.
- Homebuyer Report - offers a more detailed analysis of the property's condition, including visible defects and risks.
- Building Survey/Full Structural Survey - the most comprehensive survey, examining all aspects of the property’s structure and condition.
For most buyers, we recommend arranging at least a Condition Report to ensure you are fully aware of any issues before proceeding with the purchase.
How important is a mortgage valuation?
Accurate valuations are crucial in securing a mortgage or remortgage. At Haybrook, we offer expert advice to guide you through this process. Understanding the difference between a mortgage valuation and a house survey, and knowing how to handle down valuations, can save you time and money.
If you need further assistance or have questions about your property valuation, please contact Haybrook. Our team of experienced professionals is ready to help you with all aspects of buying, selling, or remortgaging your property.
