We explain what a mortgage valuation involves, what happens if the valuation is less than expected, valuation costs and how a mortgage valuation differs from a property survey.
Mortgage valuations are carried out for the benefit of the lender to:
confirm the property’s value
help them decide if the property will be a suitable security for the loan you’ve applied for
A mortgage valuation also helps the lender work out the loan-to-value (LTV) ratio – the amount you want to borrow in relation to the value of your home. The LTV determines the mortgage rates you are eligible for.
It’s important to note that a mortgage valuation is carried out for the lender’s purposes only and not on your behalf.
Mortgage valuations are arranged by the lender. They’re completed by a qualified surveyor who may not need to visit the property. For example, they may carry out desktop or automated valuations using various tools or data.
The valuation can be done fairly quickly, often within 1 to 2 weeks. The lender will then use the mortgage valuation to help decide if the property is a suitable security for the loan you’ve applied for.
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.
If the mortgage valuation is less than price you are paying for the property, or your estimate of its value, this is usually called a ‘down valuation’. If this happens, it doesn’t necessarily stop you from getting a mortgage or remortgaging.
If the property is given a down valuation, the mortgage lender may reduce the amount of money they are willing to lend you. You may also be unable to borrow at the same interest rate.
Mortgage valuation fees can vary, depending on the type of property.1 Some lenders, including HSBC, may not charge this fee on certain mortgage deals.
While a mortgage valuation provides the value of the property for the lender, a property survey would report on the condition and, sometimes, the market value of the property for you.
It’s a very good idea to arrange for a property survey to be done on your behalf when buying a home, to flag any potential problems.
You can choose the type of report you’d like, depending on how much detail you need:
RICS Condition Report – the most basic type of survey
RICS HomeBuyer Report – a more detailed inspection of the inside and outside of the property
Building or full structural survey – the most comprehensive type of survey
Buyers in Scotland can also request a free Home Report from the seller – this contains an energy performance certificate, a property survey and questionnaire.
Depending on the age and condition of the property, some lenders may request that specialist reports are carried out. For example, damp, timber or drain inspections.
Visit the Royal Institution of Chartered Surveyors (RICS) website to find a surveyor near you.
A mortgage valuation is based on a limited inspection of the property and, sometimes, only a ‘desktop’ report is carried out with no physical inspection. The report is also for the lender’s mortgage purposes only.
This will report on the condition of the property for you and make you aware of any essential, and potentially costly, repairs that may be required.
Some properties may not meet your lender’s requirements for a suitable mortgage security. For example, homes made of non-standard materials like pre-fabricated concrete or wood. You should check a lender’s requirements before applying for a mortgage.
Buildings insurance can protect you against the cost of repairing or rebuilding your home, should it get damaged by an insured risk. You’ll need to have buildings insurance in place when you exchange contracts, or when remortgaging. But, you can take this out with a provider of your choice.
1The Money Advice Service: A guide to mortgage fees and costs