What is a mortgage valuation?

Here, we answer some of your common questions:

What are mortgage valuations used for?
What does a mortgage valuation involve?
What could affect a mortgage valuation?
What might a lender need from you?
What to do if your mortgage valuation is lower than expected
How much does a mortgage valuation cost?
What's the difference between a mortgage valuation and a property survey?

A mortgage valuation confirms the property’s value and whether it’s suitable security for your loan. It also helps the lender work out the loan-to-value (LTV) ratio. The LTV determines the mortgage rates you are eligible for.

Remember – a mortgage valuation is for the lender’s purposes only (not on your behalf). 

A mortgage valuation and a property valuation are not the same thing.

• A mortgage valuation is arranged by your lender to confirm the property is suitable security for your loan
• A property valuation or appraisal is usually carried out by an estate agent to advise the owner on a potential market price and how much to list the property for

Mortgage valuations are completed by qualified surveyors or calculated using an Automated Valuation Model (AVM). Your lender will arrange for this to happen. 

The surveyor may not need to visit the property, and valuations can often be completed within 1 or 2 weeks. Your lender then uses the result to help decide whether the property is suitable security for the loan. 

A valuation and a mortgage lending decision are independent of each other. Once the lender is happy with both, they will usually make you a mortgage offer. 

Mortgage valuations on buy-to-let properties will also include an estimated or potential rental value, based on rents achieved in the area. This helps the lender calculate the lending amount, or LTV ratio, on a buy-to-let mortgage.

Several factors can affect a mortgage valuation. These include:

• The property’s condition and location
• The construction type
• Local comparable sales
• The agreed purchase price

These factors help your lender decide whether the property offers suitable security for the mortgage you’ve applied for. 

For most standard properties, you won't need any additional documents. However, in some scenarios, the following might be requested:

Sometimes, a lender may ask for a New Home Warranty if the property is under 10 years old or has been extensively renovated or converted. The warranty is provided by the developer or bought by the original homeowner. It offers cover for the cost of repairs or remedial works needed, as a result of structural defects in new or converted buildings. 

An EWS1 form is completed by a qualified professional, following a fire safety assessment of the building’s external wall system, such as cladding.

The surveyor, undertaking the mortgage valuation, decides whether an EWS1 form is needed. Usually, the building owner handles obtaining the EWS1 form. 

The EWS1 shows whether the cladding is considered a fire risk. Where a fire risk is found, HSBC will consider lending on flats in England and Wales with suitable remediation schemes and where leaseholders are protected under the Building Safety Act. 

Where this risk is already known, an EWS1 report is not needed.

If your HSBC mortgage valuation is lower than expected, you may be able to appeal – provided it directly impacts your borrowing amount or mortgage rate.

If the automated valuation is lower than expected, you can request a physical valuation. This option is available only if there have been significant changes to the property, such as acquiring additional land or completing an extension.

Keep in mind that the new valuation could be lower than the original and will override the existing one.

If there’s a discrepancy of 15% or £50,000 (whichever is greater), you can submit the valuation appeal form within 21 days of the valuation's completion:

Appeals that are late, incomplete, or fail to meet the criteria will not be processed.

Mortgage valuation fees can vary, depending on the type of property. Some lenders, including HSBC, may not charge this fee on certain mortgage deals.

A mortgage valuation and a property survey have different purposes. A mortgage valuation is carried out for the lender to help assess the property’s value and whether it is suitable security for the mortgage.

A property survey is arranged for the buyer and provides a more detailed assessment of the property’s condition, including any issues that may need further investigation or repair.

A home survey looks at the condition of a property to flag any potential problems for the buyer. Ideally, you should arrange for a home survey to be completed before you buy. You can choose the type of report you like, depending on how much detail you need. 

Visit the Royal Institution of Chartered Surveyors (RICS) website for more information and to find a surveyor near you. 

Buyers in Scotland can also request a free Home Report from the seller, which includes an energy performance certificate, a property survey, and a questionnaire. 

Depending on the age and condition of the property, some lenders may ask for specialist reports, such as damp, timber, or drain inspections.

A mortgage valuation is based on a limited inspection of the property for lending purposes only. Often, no physical inspection of the property is required. 

Ideally, you should get a home survey done to flag any issues. A home survey will report on the condition of the property and let you know of any essential (and potentially costly) repairs needed. 

Some lenders may not accept your chosen property as suitable security for a mortgage, such as a home built from non-standard materials, like pre-fabricated concrete or wood. It’s not always possible to confirm if a property meets the criteria until a mortgage valuation.

Buildings insurance can protect you against the cost of repairing or rebuilding your home, should it get damaged by an insured risk. You need to have buildings insurance in place if you have a mortgage. You can take this out with a provider of your choice.